Pre-IPO Playbook: Setting the stage for a successful public listing

IPOs To Watch Next Week

By Alok Bathija

Just as private fundraising requires careful planning and investor alignment, a well-executed pre-IPO strategy is essential to ensure a smooth public debut.

The objective for founders is clear: transition your early backers to a robust group of top-tier public market investors—the kind who will hold and compound your stock. Let’s break down why the pre-IPO phase matters and how to approach it strategically.

Timing the Pre-IPO Round

The Pre-IPO round—your final private fundraising event—typically happens 9-12 months before listing. Timing is critical:

# Too close to the IPO, and it risks being perceived as an anchor investment.

# Too early, and it may fail to reflect improvements in fundamentals and valuation.

The sweet spot is 12 months prior, giving you time to:

* Deliver on projections made to investors.

* Justify a gradual and credible mark-up in valuation, which regulators like SEBI prefer.

Why Do a Pre-IPO Round?

A well-executed pre-IPO round serves multiple objectives:

1) Mark Up Valuation Sensibly: Regulators discourage steep jumps (over 25%) from the last private round. If your current valuation feels outdated, this is your chance to correct it.

2) Attract High-Quality Investors: Large asset managers like Fidelity or SBI often require meaningful allocations to participate. In oversubscribed IPOs, they rarely get enough stock to move the needle. A Pre-IPO round allows them to take a substantial position.

3) Raise Primary Capital for Growth: You can use the Pre-IPO round to reduce leverage, boost growth, and strengthen your fundamentals—ultimately improving your IPO valuation.

4) Manage Supply Overhang: Private holders selling large quantities post-listing can depress stock prices. Clearing some of this supply in the Pre-IPO round reduces that risk.

Early Investor Engagement Is Crucial

Investor education is often overlooked, but it is a critical factor in a successful listing. As newer, tech-driven business models emerge, investors need more time to understand the opportunity, especially in busy IPO markets like FY24 and FY25. Founders and the company’s leadership should:

- Start engaging with key public market investors well before the IPO.

- Be consistent with your growth estimates and financial narrative to build credibility.

- Allow investors sufficient time to conduct their buy-side analysis and digest your story.

Early engagement builds trust and ensures strong institutional demand when the IPO opens.

Who Are Your Ideal Pre-IPO Investors?

The goal of a Pre-IPO round is not just to raise capital but to bring in long-term holders—investors who will compound your stock over years, not flip it post-IPO.

Few examples of the Ideal Pre-IPO investors include:

Sovereign Wealth Funds: GIC, ADIA

Large Family Offices: ENAM, Premji Invest

Crossover Funds: Amansa, Malabar

Avoid pre-IPO deal players whose primary intent is to capitalise on IPO discounts. Their short-term focus could lead to aggressive selling, competing with VCs for exits.

How Much to Sell in the Pre-IPO Round?

It’s wise to sell a decent chunk at this stage—perhaps up to one-third of your holdings. This approach allows you to:

* Realise some liquidity.

* Retain a meaningful position to benefit from public market re-rating post-listing.

For instance, Affirma Capital, which initially held a 46% stake in TBO Tek, sold 7% to General Atlantic, achieving a 9x return on its investment.

The pre-IPO round is more than a fundraising event; it is a strategic foundation for a successful IPO. Done right, it builds trust, clears the path for a smooth listing, and sets you up to succeed in the public markets.

(Alok Bathija is Partner, Corporate Development, Accel.)

Views are personal and do not represent the stand of this publication.