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Should You Take Your Company Public?

Snap Inc. just got rich. Take this survey to see if your company can too.

(Ringer illustration)
(Ringer illustration)

The Snap Inc. IPO went about as well as anyone could have expected a public offering for a company launched by an immature college bro to have gone (OK, Facebook’s IPO was bigger). Snap priced the IPO at $17 per share, which was higher than initially projected, and raised $3.4 billion in the offering. When the shares hit the open market Thursday morning, they were priced at $24, a huge jump from the IPO price. Ultimately Snap closed its first day on Wall Street up 44 percent with a valuation of around $34 billion.

There were almost too many winners to count. Founders Evan Spiegel and Bobby Murphy are now billionaires. The banks that underwrote the offering made a huge windfall for their privileged clients. Miranda Kerr rocked the flower crown filter on the floor of the New York Stock Exchange. And in a feel-good movie moment, a plucky high school that invested in Snapchat five years ago earned a big pay day all its own. The forward-thinking school is located on the rough-and-tumble streets of … Mountain View, California.

The lesson of the day is this: It’s time to get paid. Thanks to a variety of factors, companies that have been putting off making their stock market debuts are poised to do so soon. Snapchat’s blockbuster offering will only accelerate IPO timelines. We probably won’t reach dot-com-bubble levels of speculative excess (RIP Webvan.com), but earnings season is still set to get a lot more crowded.

In the coming months a lot of tech CEOs will be mulling whether the time is finally right to take the plunge into the world of quarterly earnings, annual shareholder meetings, and onerous government regulations, violations of which are punishable by imprisonment. While performing their due diligence in evaluating their companies’ viability, we hope they’ll keep these questions in mind. Forget generating profits, positive cash flow, or the potential for shareholder dividends. These are the new parameters by which a nascent company will be judged.

Are you losing money?

Oh, your small but fiscally responsible startup is profitable? Sounds like you don’t have ambitions to take over the entire world via robo-cars, delivery drones, or auto-playing video, so I’m not interested. In 1980, 91 percent of the tech companies that went public were profitable, according to Jay Ritter, a business professor at the University of Florida. In 2015, just 26 percent were. Losing money is now a badge of honor that shows that your company has ambition and is determined to achieve its mission at any cost — unless that cost involves offering workers benefits, building a competent human resources department, or crafting a business model that doesn’t revolve around time-sucking engagement.

Meets this requirement:

Have you downgraded or banished a founder?

Your paradigm-shifting technology needs a pat origin story, simple enough to be passed down to future generations in a Schoolhouse Rock song. That means your story needs a Main Guy who thought up the brilliant idea (see: Mark Zuckerberg) and a Second Guy who helped coax that idea into a scalable product behind the scenes (see: Dustin Moskovitz). There’s no room for, like, Another Guy who also played a central role, so he must have been forced out in a calculated betrayal (see: Facebook’s Eduardo Saverin, Twitter’s Noah Glass, Snapchat’s Reggie Brown). So before going public, be sure to shed that dead weight you used to call a friend.

Meets this requirement:

Have you pivoted?

No one actually likes people who succeed effortlessly — that’s why we let Michael Jordan trick us into believing he was cut from his high school basketball team. Your narrative needs a similar failure before its climactic success. Facemash was a hot-or-not rating website for Harvard undergrads — and from that origin story, we now have a social network that’s connecting the world! UberCab was a black-car service for rich people — now it’s connecting the world! Picaboo was an app for sending exploding dick pics — now it’s … you get the picture.

Meets this requirement:

Are private investors about to screw you?

Occasionally an IPO is less a ladder to new opportunity and more of an escape hatch. In this era of money-losing businesses gaining massive private investments, startups have accepted onerous terms in order to secure new funding. Spotify, for example, has to pay penalties to certain investors the longer it waits to go public. Other companies that quickly rocket to sky-high valuations could eventually risk seeing their valuations cut by investors if their business fails to grow as fast as expected (Dropbox) or if their tech doesn’t live up to the hype (Magic Leap). Sometimes it’s best to get out of venture funding while the getting is good.

Meets this requirement:

Are you teen-approved?

One surefire way to get investors interested in your stock is to prove that a cohort of people with relatively little spending power but lots of “social influence” is all about your product. Instagram got acquired for $1 billion thanks to teens. Snapchat is now a $34 billion corporation thanks to teens. Aligning your business interests with these mysterious creatures will put you on the fast track to success.

Meets this requirement:

Has your origin story already been made into a movie, or at least a book?

If your business isn’t ubiquitous and vaguely sinister enough to be worthy of a feature film, how can you expect it to be worthy of Wall Street? It doesn’t matter if the movie paints your company in a bad light — unless it’s a documentary, that is. What matters is that your money-making scheme has crossed the pop culture threshold to be worthy of romanticization, ideally via David Fincher and Jesse Eisenberg. Maybe we can’t live with your frivolous app, but we can’t live without it either. A book about your company is a more boring, less widely acknowledged version of this phenomenon.

Meets this requirement:

Do you have a magic metric?

The dumbest thing you can do as a newly public company is let investors and press immediately define your performance against a way, way more successful public company. At its IPO, Twitter was crowing about its growth in monthly active users — too bad that growth stalled out, and Facebook has way more monthly active users anyway. Snapchat is instead focusing on daily active users, a less widely disclosed metric, as well as figures like daily time spent on its app. When Uber goes public it will probably tell us about the number of rides booked per fortnight or something, and we’ll have no idea whether that number is good or bad. But every quarter it’ll probably go up, and everybody loves watching little numbers turn into bigger ones.

Meets this requirement: