90% of startups fail! Only a small portion of those that survive grow to be independent public companies. If you’re at a company that’s grown a thriving business that’s on the cusp of going public, congratulations! You’ve helped to create something in the world that few others ever have the opportunity to be a part of in their careers. 

We’ve heard from recruiting leaders in our community that have struggled with what to do when their company announces that it’s going public. It can feel like you’re in handcuffs, yet the expectation to hire through the IPO remains. 

As a recruiting leader, there are several things that are likely true in parallel. You need to personally process what’s happening and how to feel about it. You need to lead your team through both an exciting yet challenging time to continue hiring against your goals. Finally, you need to be prepared to speak confidently to external candidates about the opportunity to join your company. And, you need to do all of this at the same time and seemingly overnight.

We’ve experienced this process several times both as part of the confidentially disclosed team responsible for taking a company public and on the ‘surprise, we’ve filed out S-1 today’ receiving end of the process as well. Regardless of how involved you’ve been, the expectations are the same for you to navigate the team through the process.

We are not...‍

• Lawyers
• Accountants
• Financial advisors
• Professional investors
• Fortune tellers

1. Put on your oxygen mask

Before you can lead others through turbulence, you need to make sure YOU are settled in with your own oxygen mask on. Take a breath and remember the context of the financial markets.

Take a breath:

• Reflect on why you joined your company, re-ground yourself in that. It was probably some combination of the product/service the company was building and the amazing team that you’ve been able to work with.
• You’ve been working towards building a business that one day would be mature enough to become a public company.
• You and the team did it! It’s an exciting moment in time, and you should be proud of what you’ve helped to build.

Context: 

1. The stock market is volatile with many things out of the company’s control.
2. As a result, the IPO process will be volatile, emotional and bumpy — that's ok, it's normal and every company that's gone before you goes through the same thing.
3. Did you know that Google expected to IPO between $108-$135 per share, but ended up at $85 per share on their IPO day? Facebook IPO price was $38/share and 4 months later was trading for $17-18/share. In hindsight, it’s easy to only focus on the success those companies have had, but their IPOs were anything but smooth and always up and to the right. 
4. Stay focused on what you 'can' control (high energy, positive attitude, supporting each other, delivering on your goals) — don't fight the uncertainty, move through it with the amazing team around you. 
5. Don't let the stress of not being able to predict the future distract from the excitement of what's happening in the moment you’re in.

2. Prepare your team

The hardest period is often referred to as a ‘Quiet Period’ (aka hell for recruiters). A quiet period is a period of time leading up to a potential IPO. During this time, there are restrictions in place on what you can say. It’s very important that recruiters not communicate publicly about the business, about anything that could “encourage interest in the IPO” or provide material, non-public information on the company or forward-looking statements. So, basically not much that would help candidates understand the value of equity in their offers.

What you often cannot do:

• Discuss the IPO, quiet period, business or growth with anyone outside the company. This includes sharing any articles about the IPO in the press on social media.
• Speak at any conferences, meetups, or any other event where you represent the company.
• Speak with press, bloggers, or anyone writing for an external audience. Nothing is “off the record.” Ever. It’s important to remember that anything you say or are overheard saying by a reporter or blogger can be printed.
• If someone says something they shouldn’t during this time, it could delay the IPO, and create personal civil and criminal liability. 

Context for your team: 

1. Don't forget that this is a moment in time and pricing during this time doesn't determine future success — share historical examples with your team.
2. There may be things written and said that aren't correct as the media and bankers/investors try to understand your business. Unfortunately, you won’t be able to comment on things that may not be based on the facts.
3. Remember that former employees are FORMER employees. They are no longer current employees, so you cannot discuss anything related to the IPO or health of your business with them. They are no longer under NDA. Same rules apply with friends and family.

Communicate with your team as soon as possible, be transparent with what you do and don’t know. Even better if you can get your CEO, CFO, or key member of IPO team to speak to the team about messaging for candidates. Share FAQs and a plan for how to communicate with external candidates.

Example team messages:

• From the beginning, we’ve always focused on the long term. We will continue to focus on our mission and build products that help our customers be successful. 
• We remain as confident as ever that if we build great products and continue to put customers first, we will be well positioned to build a tremendous business in the process.
• You should expect that the company will be under intense scrutiny during the quiet period. The media will be motivated to create stories to build an audience, which will be both overly positive and unfairly negative. The frustrating part is that you will not be able to respond during the quiet period, even when speaking with family, friends and former employees. The best thing we can all do is stay focused on what we are building and what we each need to deliver.
• There is a precedent of companies going public, experiencing significant short-term volatility, and growing incredible value over the long term.  The companies that have been successful in doing that have remained focused on hiring great people and building amazing products. 
• For Mgrs: You play an essential role in keeping your teams focused and delivering during this period of transition and distraction. Please be visible and available for your teams, and have a good sense of the vibe on your team, so that you can keep them focused and on the right path. This is a good time for team meetings, connecting with individuals during 1:1s, and to spend a little extra time connecting with people as you go through your day. The markets will judge the company based on business results. The biggest thing you can do to help the company’s path to IPO is to keep yourself and your teams focused on your work and delivering results. This is a great time to lead by example.

Every business and IPO will have nuances in what needs to be communicated and when. For example, you may or may not be in the middle of university recruiting season where you’ve extended value based offers. Your company may be doing a stock split of some kind as part of the IPO readiness process.

Sample FAQs: 

What can we say during the quiet period about IPO press stories?  Anticipating market volatility

• The volatility of our stock price is something that comes with being a public company, and not how we think about the health of the company.  We are continuing to grow our customer base and have strong momentum. Our ultimate goal is to build great experiences for our customers. We believe that focusing on this will allow us to build a long-term, successful business.

How should I talk to candidates about the IPO and the trajectory of the stock price since IPO?

• The IPO is an important step/milestone for the company but is just that – a milestone. We say internally that we’re just getting started and want you to join us to build our company for the long term. We think about the equity we grant our people as a long-term investment since it vests over time. Today’s stock price is not as important as the value that we are all building in the long run together. 

What if a candidate thinks that they’ve missed the boat now that the company is going to IPO?

• We believe <<your company’s mission and value statement>>,  and we’re just getting started towards achieving that mission. Now is a great time to be joining.
• Do you think that the first couple thousand employees at Google missed the boat? Apple IPO'd in 1980, look at them now, over 40 years later.

3. Check-in with candidates

There may be unique circumstances for your company’s IPO process where proactive communication is necessary. For example, if your company is doing a stock split, you will need to evaluate candidates that have extended or accepted offers and have them sign amended offers. Regardless of the circumstances, it’s important to first prepare your team and then have them make sure candidates are still excited about joining your company. One tactic that works well is to establish a virtual/live room (Zoom, chat, conf room) where recruiters can share messaging that’s resonating, real-time questions, etc. 

Sell conversations during quiet period:

• We believe in our mission and the positive impact we are having with our customers.
• We've put together a compelling offer based on all of our conversations about your expectations.
• What matters for you is the future you help us build and the value that will create.
• If you look at the companies that are building the tools to change people’s lives (Amazon, Apple, Netflix), you don’t remember a lot about their stock price on their IPO day. Did you know that Google expected to IPO between $108-$135 per share, but ended up at $85/share on their IPO day? We think they turned out ok. Facebook IPO price was $38/share and 4 months later was trading for $17-18/share. In hindsight, it’s easy to only focus on the success those companies have had since then, but their IPOs were anything but smooth and always up and to the right.

4. Be a good partner

In the lead up to an IPO, there are numerous things your company will need to do to mature your business and operations. A big part of that is forecasting revenue and costs, mitigating risks to the company, and understanding some degree of predictability related to the balance sheet. One of the biggest drivers of cost for you company is people. So for recruiting teams, that means there are numerous areas that will need to mature in your operations. Sometimes these changes can feel like bureaucracy to the culture you’re used to, but remember these are often things that are required to operate as a public company and for your stock to be worth something meaningful. 

Recruiting operations will need to evolve:

• Key executive and Board hires will need to be made to solidify your leadership team and governance - Investor Relations, Chief Marketing Officer, Chief Security Officer, Chief Compliance Officer, CHRO/CPO, VP of Total Rewards, etc.
• More controls will need to be built into your headcount and offer processes. This will often involve building more systematic approvals so a history of approvals can be tracked and reported in the case of an audit.
• Background checks and other compliance requirements will need to become a consistent part of your process if they aren’t already.
• For the first time, your company will need to publish your compensation philosophy and executive pay to the public. This is often a time when companies will reassess their compensation and rewards approach to look ahead at the needs longer term as a public company. This could mean some things may be less flexible than they have been in the past - bonuses, trading salary for equity, accelerated vesting, etc.
• One of the hardest things for recruiting teams is often the evolving compensation structure for how the company hires going forward. For example, shifting from Options to RSUs and shifting the mix to balance cash and equity. Remember that going public reduces a big component of risk for candidates that hasn’t been true in the past. Their stock will be liquid as soon as it vests vs. some unknown time in the future.

Additional Information

Different paths for going public

There are different paths for companies to transition into public markets. Our experience and this guide are focused around the traditional IPO path, but we wanted to touch on other methods as well.

Initial Public Offering (IPO) = Airbnb, Pinterest, Facebook

• Underwriters/banks help market shares of the company to investors — charge 2-8% of capital raised.
• Roadshows explain to investors why they should buy shares in the company. 
• 90 or 180 day lock-up period.
  

SPAC = Virgin Galactic, DraftKings, Opendoor

• Special purpose acquisition companies.
• Investors basically right a blank check with the hopes that a successful company is acquired.
• The money raised in an IPO is placed in an interest-bearing trust account. 
• These funds cannot be disbursed except to complete an acquisition or to return the money to investors if the SPAC is liquidated.
• Shell company/SPAC then acquires/merges with the company wanting to go public.
• Faster, and sometimes cheaper, way for companies to go public. A SPAC merger usually happens in three to six months on average, while an IPO can take 3X to 4X longer.
  

Direct Listing (DPO) = Asana, Slack, Spotify

• Healthy balance sheets, don’t need the cash.
• Companies with a lot of money and brand recognition can save money on bank fees via a direct listing. 
• Skip the middlemen - existing stakeholders basically sell their shares directly to new investors once the company is listed. The company itself doesn't raise any cash.
  

Terminology

Terms that you’ll hear with a traditional IPO process

Quiet Period (aka waiting period aka silent period aka cooling-off period) 

• IPO candidates = starts when S-1 filed until 40 days after stock begins trading. 
• The time in which company must be silent about it, so as not to inflate the value of the stock artificially and creates level playing field for all investors.
• Public companies = 4 weeks prior to close of the business quarter.
  

Lockup Period 

• The time employees will be ‘locked out’ of selling their equity.  Helps stabilize the stock price after it enters the market.
  

Blackout Period 

• The time when employees are not allowed to sell stock when major changes are being made.  For example, end of quarter earnings.  Purpose is to prevent insider trading.

S-1 Filing

• Registers company with SEC prior to listing on exchange. Provides the SEC and prospective investors with a detailed look at the company's business, financial statements, potential risks, and plans for the cash from the public offering.

Roadshow

• Pitching company to investors and setting the final IPO ‘offering price’. Starts as a range and gets adjusted up/down as company gets feedback and sense of demand.

IPO Pricing

• It’s an art and science to find the right friction point between supply and demand for the amount the company wants to raise.
• This article does a good job of explaining: In Defense of the IPO, and How to Improve It - Andreessen Horowitz

Day of IPO

• Night before IPO bell ringing, company sells new shares/float to investors.
• Company term sheets and stock plan agreements with existing investors determine who can sell what and when.
• Typically most ‘insiders’ (employees) need to hold through lock-up to stabilize supply/demand.
• Morning of opening bell

• Hurry up and wait for opening trade price → not the same as offering price
• Buy orders roll in (hours!)
• A mysterious guy magically sets the opening trade price based on volume and bids to match supply with demand.
• Price gets set and stock is live for trading on the exchange.

Recruiting Team Prep

Candidate scenarios to keep in mind, especially during the quiet period.