Startup IPOs and the Impact on Treasury Management

Startup IPOs and the Impact on Treasury Management

As a startup, the goal is to achieve sustainable growth, become profitable, and eventually go public or be acquired by a larger company. Initial Public Offerings (IPOs) have become increasingly popular among startups as a way to raise capital and fuel growth. However, going public involves a lot of compliance, regulatory obligations, and impacts treasury management. This article will explore how startup IPOs impact treasury management.

The Treasury Function in a Startup

Treasury management involves managing a company’s financial operations and ensuring the availability of cash and capital. The treasury function includes activities such as cash management, cash flow forecasting, liquidity management, risk management, and compliance. In a startup, the treasury function may be handled by the CFO, finance team, or a treasury team, depending on the size and complexity of the organization.

Going Public and the Impact on Treasury Management

When a startup goes public, its financial structure changes drastically, and consequently, the treasury function also undergoes a significant transformation. Here are some of the impacts of a startup IPO on treasury management:

1. Increased Compliance and Regulatory Obligations

Once a startup goes public, it becomes subject to a host of compliance and regulatory obligations, including filing periodic financial statements, complying with corporate governance requirements, adhering to accounting standards, and following securities regulations. As a result, the treasury function must ensure that financial operations follow these regulations.

2. Capital Markets and Cash Management

Going public provides access to capital markets, which in turn ensures a steady inflow of cash. However, accessing capital markets involves complying with regulations, and hence the treasury function must prepare the company for these requirements. Additionally, the treasury team must manage cash flow and liquidity, in order to maintain optimal capital levels.

3. Investor Relations

Investor relations management is a crucial aspect of treasury management. Once a startup goes public, it needs to ensure it has a good relationship with investors to maintain the confidence of the market participants. The treasury team must ensure that investors are kept informed about the company’s financial health, performance, and growth initiatives.

4. Risk Management

Risk management becomes more important after a startup goes public, as the company becomes exposed to various risks such as market risk, credit risk, operational risk, and regulatory risk. The treasury function must establish financial risk metrics and define risk controls to manage these risks. This involves developing hedging strategies, tracking exposures, and reporting to the board and investors on financial risk management.

5. Organizational Structure

The treasury function also needs to restructure after a startup goes public, as the department’s scope expands. The treasury team may need to hire additional professionals, update policies and procedures, and enforce best practices.

Conclusion

Going public provides access to capital markets, brand enhancement, and growth opportunities for startups. However, it also involves a lot of compliance and regulatory obligations that can impact treasury management. The treasury function must prepare for these changes, establish solid financial controls, and maintain good investor relations to ensure sustainable growth. Maintaining good treasury management can help startups succeed in their IPOs and beyond.