CMOs play a vital role in IPOs
- 16 October, 2019 07:05
More CMOs need to insert themselves into the initial public offer (IPO) process, something they are not yet taken seriously for in a company’s drive to make the process all about the financials.
This is the view of operating partner at Insight Partners, Gary Survis, a NYC-based software investment firm and an expert on startup scaling process with $20 billion under investment and four of the top 15 IPOs in 2018.
Survis told CMO people often forget successfully going public means a company must have been successfully marketed, and this happens under the leadership of the marketing chief. He said a company needs to be able to effectively promote themselves to investors in a way that paints a unique picture, emphasising the big wins and heightening excitement around the business’ success.
Which means marketing should be brought in on the ground floor – it cannot be an afterthought.
“A successful IPO requires marketing to stakeholders and leveraging all communications leading up to an IPO to set the groundwork and build brand awareness along the way," Survis told CMO. "Whenever there is an IPO process, someone has to be the ring leader, to make sure that all of the moving pieces are aligned and ladder back to consistent messaging. While the CEO and CFO are focused on IPO technicalities, the best person to be focused on the big picture and keeping all parties in line, is the CMO.
“To put it simply: A successful IPO must involve the CMO from day zero."
According to Survis, by the time a company has begun its roadshow to secure investors and underwriters, a tactical marketing strategy should have already been put in place.
"It’s important to remember this work doesn’t start when a company is ready to IPO, it starts years in advance,” he said.
Survis also believed CMO should be leveraged at all stages of the process - pre, post and following an IPO - to ensure success.
“For pre-IPO, this is the work your CMO is doing from the day he or she is hired. Marketing is the function helping a company define its category, establish a compelling reason for customers to be interested in your products or services and ultimately grow into new markets or territories. These are the growth ‘proof points’ that will show a company is on a path to success and underpins its reason for going public.
“During an IPO, in addition to being the person who corrals everyone during the IPO process and controls messaging consistency, a company should involve the CMO in every executive discussion, from inception, to rollout, to implementation. This ensures the company’s strategy brings to life its biggest wins, its new products and offerings."
To maximise returns throughout the course of a roadshow, executives and founders need to recognise marketing is not an afterthought, but rather a pivotal part of an integrated IPO strategy., Survis continued. An IPO is not the time to pull back on marketing resources, but rather the time to double down on marketing to drive success, he said.
“After an IPO is the time the CMO really gets to work," Survis said. "If you have ever read a company’s prospectus you will often see a 'Use of Proceeds' statement, which is a summary of how a company intends to use investor funds. This typically explains what a company will do to fast track its growth and deliver value for their shareholders, and a large portion of this spend is often attributed to marketing.
"As we all know, a great plan takes time to create and its goals and deliverables should be consistent to everything the company has said to investors, partners and customers throughout the IPO process, pointing again to the fact the CMO should have a seat at the table from the very beginning.”
For CMOs undertaking a part in the IPO process, defined strategies and tactics are key. A CMO should already have a strategy in place to educate both internal and external stakeholders on the latest company offerings, solutions, and lead generation that create sales and revenue.
“It requires fine-tuned stakeholder mapping exercises with a defined plan to streamline communications that work well for the organisation. It cannot be a one-size-fits all approach and should be determined based the structure of the organisation," Survis said.
“With more than 40 of Insight’s portfolio companies going public over the years, we can say with certainty the CMO’s role is critical to the IPO process. But we recognise that for many first-time CEOs and CMOs, an IPO is daunting. Executives should prepare by looking at the best practices of others, informing their decisions with data and seeking out the counsel of trusted advisors.”
Ensuring marketing is ahead of the curve, and is mapping directly to the strategic business goals, means giving the chief marketing officer and marketing function a seat at the table. Therefore, CMOs need to be ‘in-the-know’ and a part of the decision-making process, Survis explained.
As an example, he pointed to cyber risk management company, Tenable, as a company that set the marketing balls in motion well ahead of its IPO in July 2018.
"Roughly one year before starting the IPO process, Tenable recognised how critical it was to have a clear story and market position for its cybersecurity solutions," Survis said. "The company got to work defining what its category was going to be, with the idea of creating a market-leading cyber exposure platform. This positioning would help the company stand out among competitors and provide a strong story to present during the IPO roadshow.
"Tenable was able to create a category that clearly articulated the value the company brought to the cyber security landscape, and this was positively received by investors with a 40 per cent jump in its public market debut.”
Because the role of the CMO is so crucial in the IPO process, Survis advised marketers to insert themselves into the process, even if the board is less than receptive.
“CMOs shouldn’t allow themselves to be sidelined and should reaffirm the important role they play. Companies should leverage marketing’s ability to tell their growth story and provide resources that allow it to do so,” he said. “An IPO isn’t just a financial exercise – it’s an exercise in marketing, as well. The CMO is the person who is best qualified to help craft that company’s message; the North Star for every growing company looking to fulfil a successful IPO.
“In my experience, an IPO is just one moment in time that illustrates the value an organisation places on the marketing function."
It's not surprising then to find Insight is bullish on marketing being a primary driver of growth. It's one of the reasons why the business works closely with executive teams to make sure CMOs have a seat at the table.
“The biggest mistake a company can make is by thinking that the road to IPO is purely a financial exercise. Too often, marketing is overlooked and left for the final stages of the IPO process – if it’s even included at all – and this is a wasted opportunity to strengthen your messaging and market position," Survis said.
“Thankfully times are changing. With a number of recent IPO horror stories to point to, technology companies and investors alike are starting to see the undeniable impact that marketing and brand recognition can have on the success of an IPO and the future of a company."
With more than 30 years developing strategic marketing campaigns and working with CMOs across the tech sector, Survis has seen many marketers "quietly flexing their muscles and paving the way for marketing as a vital component to enterprise growth".
"At Insight, we are seeing more and more exceptional CMOs commanding a seat at the boardroom table and look forward to supporting their growth in the software industry,” he added.
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