Start-up CEOs entering the public market have a love-hate relationship with their investment bankers. On the one hand, they are helpful in introducing a company to a wide range of asset managers who hopefully will hold their company's shares for the long term to reduce price volatility and thereby reduce employee turnover.
On the other hand, they are. It's incredibly expensive and costs millions of dollars in insurance fees and associated costs.
Worse, the advice you get from investment bankers is rather vague. Talking about IPO windows, timing, pricing, and more is particularly tricky for Silicon Valley CEOs who rate human experience data. This has led to more than one attempt to disrupt the investment banking sector and the entire public circus.
However, and Lyft are evidence that investment bankers are actually quite smart in their advice on public markets, and founders should be cautious in ignoring their words.
Let's look at some case studies.
Let's first take the vaunted "IPO window", which is discussed ad nauseam among investment bankers and the financial press. The idea of the "window" is that you have to schedule a new public stock issue to reach a favorable moment in the markets. They want investors who are focused on growth and are not preparing for a recession.