How Brex helps companies get IPO ready.
Ben Gammell
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1 min read
1 min read
How Brex helps companies get IPO ready.
Are you ready for exit?
To say that IPO activity has been muted over the last two years would be an understatement. However, last fall showed promising signs when companies like Instacart, Arm, Klaviyo, and Birkenstock opened the IPO window, and many suggest 2024 will be a solid year for IPOs. Several high-profile businesses, like SHEIN and Reddit, have already filed their paperwork and preparations are well underway.
A bounce-back in IPO activity would be a positive development for the tech ecosystem. At the end of the day, there are two main ways for startups to access meaningful liquidity: M&A and IPOs. As we have recently seen with mega M&A deals (notably the Microsoft <> Activision Blizzard and Adobe <> Figma deals), these can come with significant regulatory scrutiny. While Microsoft was eventually able to close their acquisition last October, Adobe was not (after 15 months of limbo with regulators). This dynamic does not exist in the IPO world. Going public is still the crown jewel for founders, investors, and employees as far as startup exits go. It’s fair to say that nothing can quite match the excitement of ringing the opening bell on the first day of trading.
If done right, preparing for and executing a successful IPO can be the most rewarding work of an entire career. On the other hand, if a company does not have their ducks in a row, it can be one of the more stress-inducing experiences. Over my more than five years at Brex, I have seen many companies, including Robinhood, Hims, etc., go public using our solution as their financial back-office tool. Many have explicitly mentioned that Brex’s offering helped meaningfully in both their preparation work and then importantly as public entities (the IPO is just a moment in time after all), so below I want to highlight a few areas I have seen these Brex customers particularly benefit from.
Forecasting accuracy.
As a public company, your financials will be under more scrutiny than when you were private. Equity research analysts, hedge funds, and retail investors alike will all judge your performance and vote with their dollars. You will produce and report your historical financials each quarter, and provide an outlook for the rest of the year. Minimizing your variance between your forecast and actual performance is crucial. It gives analysts and investors confidence in your ability to manage the business, and all else equal consistency and accuracy tend to translate to higher share prices.
Brex offers the only truly global platform for spend management. Rolling out Brex to your employee base well ahead of an IPO will make forecasting the cost side of your P&L much easier, as budgets that employees will spend against will already be predetermined. You will also benefit from this post IPO, as instead of worrying about meeting reporting deadlines you can allocate time to form the story you’re going to tell investors, decide how to position your financial guidance, and other higher-ROI activities.
A+ compliance.
Anyone who’s ever done any form of IPO readiness work will tell you that the process inevitably comes with a lot more work than initially anticipated, and surprises constantly pop up. In a prior life, as an equity capital markets investment banker, I helped prepare companies to go public. What clients consistently wish they would have invested more resources into earlier was two things: (1) internal controls and audits, and (2) strong FP&A and reporting capabilities. In my view, most aspects of getting “IPO ready” (preparing the various registration statements, identifying and managing enterprise-wide risks, ESG reporting, etc. etc.) can all be managed if sufficient time and energy is set aside.
Building solid controls and audits and being able to predict the financial performance of the business, however, can take many quarters (or even years) to get right. Building out a strong Finance and Accounting organization is of course crucial, but without the right tooling, this team can be at a real disadvantage when preparing to go public. This is where Brex’s solution can really make a difference. Don’t take my word for it. This is what Teddy Collins, VP of Corporate Finance at SeatGeek has to say: “Brex offers a level of enterprise-grade automation, integration, and security that far exceeds the 10 other providers we evaluated.”
Countless labor hours saved.
Every business wants to run as efficiently as possible. Over the last year, we have prioritized building AI-powered solutions across all of our workflows. Brex AI eliminates manual work by automating tasks across our spend platform. The tool auto-fills expense reports, uses machine learning to guide managers to expenses worthy of human review and automates the rest, and provides insights in and around accounting rules, anomaly detection, and concerning spend trends.
Implementing Brex AI will reduce your team’s manual work and free them up to focus on higher ROI-efforts. You will also be able to close your books faster, every month and quarter as a result. As a public company, you have to produce your financial reports by a certain date after each quarter closes. At large organizations, this process can take up 100% of the time for entire teams for weeks after each quarter closes. Fundamentally changing this process, which Brex’s offering allows you to do, can be a game-changer for your business. If you’re curious, our President Karandeep Anand was recently quoted in Pymnts on this specific topic.
Ability to steer with agility.
When a company is small, decision-making and prioritization are easy. As small startups grow into larger enterprises, it’s common to see miscommunication, slow and inefficient planning process, and lack of internal alignment start to creep in. Absorbing new context takes longer and things can get lost in translation. Successfully fighting back against these traits is often what separates the really great business from the not-so-good ones.
All the examples mentioned above (higher forecasting accuracy, a higher compliance rate on company spend, and fewer hours of manual labor) will make your company more nimble. Laying this foundation pre-IPO will pay dividends over and over again.
See what Brex can do for you.
Learn how our spend platform can increase the strategic impact of your finance team and future-proof your company.