What type of entrepreneur is suitable for an IPO, or rather not?
- The Scaler with High Capital Requirements
Profile:
- Rapidly growing business model
- High investment needs (internationalization, technology, acquisitions)
- Equity is more important than debt
Why an IPO makes sense:
- Access to large, repeatable sources of equity
- Shares serve as an acquisition currency for buy-and-build strategies and competitor buyouts
- Independence from banks and individual investors
Typical Industries: Technology, industrial platforms, infrastructure, and many more.
- The Structured, Process-Oriented Entrepreneur
Profile:
- Enjoys working with KPIs, reports, and governance
- Does not view transparency as a threat
- Able to delegate responsibility
Why an IPO makes sense:
- The capital market demands exactly this level of professionalism
- Good leadership is rewarded
- The IPO acts as an “organizational upgrade”
- The Visionary with a Long-Term Story
Profile:
- Clear, communicable future strategy
- Patience for market misunderstandings
- Readiness to explain their own story repeatedly
Why an IPO makes sense:
- The capital market can finance big visions if they are credible
- Long-term investors look for exactly these types of stories
- The stock exchange trades on the “future”; sound storytelling is rewarded and finds buyers
- Scaling without the pressure to exit
- The Exit Planner with Partial Liquidity
Profile:
- Does not want to sell everything
- Wants to diversify wealth – no longer “putting all eggs in one basket”
- Wants to continue leading the company and remain in control – unlike with PE, VC & Co.
Why an IPO makes sense:
- Partial sale without loss of control
- Flexible, step-by-step exit – potentially involving a generational transition (e.g., moving from CEO to Chairman of the Board)
- Significantly higher valuation for the entrepreneur than in private equity deals – where PE investors want the bulk of the deal for themselves…
- The Reputation and Brand Strategist
Profile:
- Brand, trust, and visibility are central
- Customers are large corporations, the state, or international partners
Why an IPO makes sense:
- A stock exchange listing signals stability and seriousness
- Facilitates large-scale orders, recruiting, and partnerships
- Easier access to and retention of “high potentials” as employees
- Retention of executives through stock programs
- Public perception as a market leader
A type of entrepreneur for whom an IPO is not really advisable.
- The Absolute Control Entrepreneur
Profile:
- Wants to make every essential decision personally
- Views co-determination as interference
- Rejection of external oversight
Why an IPO is problematic:
- Stock exchange = permanent justification
- Governance conflicts with sole decision-making and ego
- High frustration factor
Better: Family holding, private ownership, hereditary dynasty
- The Discreet SME Owner
Profile:
- Stable, profitable niche
- Usually a long-standing company with products in mature markets with low growth
- Low capital requirement – self-financing through cash flow
- Competitive advantage is perceived to be based on secrecy
- Established entrepreneurial family – no willingness to open up to third parties
- Saturated; why add extra “stress”?
Why an IPO is unnecessary:
- Disclosure is perceived to harm more than it helps
- Costs are disproportionate to the added value
- Banks usually finance such models without issues
- The Operational Doer
Profile:
- Strong focus on day-to-day operations
- Declared aversion to capital markets, IR, analysts, and press/media
- Impatient with bureaucracy, compliance & Co.
Why an IPO is burdensome:
- Perceived as a useless time-sink
- Permanent distraction from the core business
- Risk of strategic missteps due to annoyance
- The Culture-Driven Entrepreneur
Profile:
- Corporate culture is more important than growth
- Money and growth are not motivators
- Entrepreneur is practically “product-driven,” not “market-driven”
- Employee retention takes precedence over scaling
- Fear of “anonymous investor logic”
Why an IPO is risky:
- Capital market pressure could change the corporate culture
- Compensation, KPIs, and bonuses alter behavior
- Employees might lose the close connection to the owner
- The Cyclical or Hard-to-Explain Business Model Type
Profile:
- Highly fluctuating results
- Project-based business
- Complex revenue logic
- Occasionally non-transparent, tax-sensitive circumstances (“one pays no taxes but lives very well because of it”)
Why an IPO is difficult:
- The market hates unpredictability
- Volatile share prices create constant stress
- Permanent undervaluation is possible
- The Price-Earnings Ratio and market capitalization are ultimately based on reported profits
The Deciding Question for Entrepreneurs
Do I want capital, maximization of company value and personal wealth, public visibility, and co-determination – or autonomy, discretion, and maximum control?
However, it should be noted that while autonomy and control may apply in-house, they can quickly end when faced with the intervention rights of external financiers such as banks and individual investors.
An IPO, and the subsequent life of “being public,” must be embraced by the board and must suit the entrepreneur’s personality. Anyone who finds any form of public exposure—beyond the level strictly necessary for an entrepreneur—unpleasant will not be happy here or will find it burdensome.
Following the slogan “No business like Show Business,” it is generally the more extroverted entrepreneurial types—those who can sensitively and charismatically serve or “entertain” their target groups (which now include investors and the capital market alongside customers)—who achieve the best results.
In fact, the facet of access to the capital market opens a new, very interesting, and rewardly dimension of activity for the entrepreneur, bringing new skills, experiences, and the opportunity to meet interesting investor groups and other stakeholders.
Conclusion for Entrepreneurs
It would be naive to assume that an IPO, with all its significant advantages—such as permanent access to interest-free growth capital at a valuation basis many times higher than that of private limited companies (GmbHs), and the significantly higher personal wealth for the entrepreneur associated with it—comes without corresponding obligations. The post-listing requirements have their price in the form of increased transparency, publicity, regulation, and manageable costs. The fact remains that for issuers, the benefits clearly outweigh the drawbacks.
An IPO is not suitable or attainable for every entrepreneur or company!
Furthermore, an IPO is not a panacea or a guaranteed success, but rather the result of a healthy, strong company foundation and the vision and determination of a charismatic entrepreneur.
An IPO remains the “supreme discipline of corporate finance.”