Companies go public for a lot of well known reasons: to reward investors and employees, to help fund cash-intensive operations, and for acquisitions.
But there’s another reason that entrepreneurs and VCs don’t often talk about.
Credibility.
Obviously, you have to be ready — your books have to be spotless and your growth has to be obvious.
But if you’re the first company to go public in a new area, you get to define the market. Everybody can see how much money you’re making, how fast you’re growing, and how many customers you have.
Doug Leone, a partner at Sequoia, used the examples of Salesforce, which was an early pioneer in delivering business software over the Internet (“the cloud”), and Amazon, which defined e-commerce back when the Web was new.
“Look at Marc Benioff and Jeff Bezos,” said Leone. “They stole the microphone and controlled the industry. Neither said, ‘I don’t wanna be public, someone might look at my numbers.’” (Imagine him saying that last part in a whiny voice for full effect.)

Tony Zingale, the CEO who took Jive Software public last December, agreed that going public relatively early — with an $80 million annual revenue run rate and no profits yet — was important to give Jive a leadership position in social computing for the enterprise.
Jive had been around since 2001.
But, as Zingale said, “Marc Benioff’s screaming from the skyway saying he invented the social enterprise, everybody and their brother’s now saying they have a solution, including Microsoft and IBM. I wanted to be first to the pulpit, to speak with evidence and confidence about our customer base and our technology lead.”
Bill Gurley of Benchmark Capital noted there are exceptions. Like if you’re a once-per-decade icon like Facebook.
“If you work at an iconic company, you can do whatever you want. You can go public at a rodeo if you want. But most of us don’t work at an iconic company. A lot of founders want to be first and set the market.”
The VCs and entrepreneurs spoke last night at an event sponsored by online financial advisor Wealthfront. The purpose of the event was to encourage young companies to consider going public, despite the perceived hassles like increased scrutiny and more paperwork and management overhead.

Read more: http://www.businessinsider.com/bill-gurley-doug-leone-and-tony-zingale-on-going-public-2012-4?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=SAI%20Select&utm_campaign=SAI%20Select%202012-04-06#ixzz1rGRxssWq

The crowdfunding and advertising provisions of the JOBS Act have been under heavy fire from those who say they are an open invitation to fraud.

Let me say, I hate fraud. I hate it with a passion. But I disagree.

With regard to crowdfunding and the advertising of 506 offerings, the critics say it will allow fraud to be perpetrated on investors.

However, Reg D, Rule 504 actually permits advertising of offerings and does not require any specific disclosure. The JOBS Act actually has much more regulation of offerings. No audited financial statements are required in a 504.

Yet, as much as 504 has been abused, we do not hear any voices calling for its removal. We do not hear claims of an epidemic of 504 fraud.

Reg A now does not require audited financial statements. Where is the epidemic of Reg A fraud?

In fact, it can be harder to get a Reg A approved and marketed than a full IPO registration.

Even when the SEC came out with its rule on seasoning reverse mergers, they did not call for this path to capital be closed altogether.

Communication is good. Disclosure is good. Financing innovation is a good thing.

Let’s not let the bad actors once again ruin it for the rest of us.

Venture capitalists and bankers have had their way with small companies for too long. Let the rest of us play the game.

As most people are ethical and honest (society could not exist if this were not so), the gains from financed innovation will always outweigh the losses to those who are warped enough to trample on the law.

Consider the value built by recent social media companies — the hundreds of billions in market cap totally overshadows any losses to fraud in social media companies, right?

 The Senate passed the Jumpstart Our Business Startups JOBS Act, but it changed the provisions on crowdfunding. Here is my take on take this bill.

Raising the Reg A limit from $5 million to $50 million is a good thing, but Reg A review by the SEC was often more arduous than a full registration. The effect of the change is to allow larger companies to go public without audited financials. That, if the Chinese reverse merger debacle has taught us anything, may not be a good idea. Accounting fraud is the curse of public investors. Further, some states prevent or sabotage Reg A offerings, so this may be less help than it first appears to be.

The Act would raise the shareholder registration requirement threshold from 500 to 1,000 shareholders. That is a good thing and will make markets for private stock more important.

The Act will require crowdfunding intermediaries to register with the SEC as a broker or a funding portal. The House version does not registration. My guess is the registration requirement will stick in the final law. I do not see this registration as inherently a bad thing, except that in general more regulation is more expense and interference. Allowing crowdfunding will increase money flowing into startups, a good thing overall, but with horrendous risk. We trust the gains will outpace the losses and society will benefit. Seed money is always hard to get and this will allow more innovation overall. I hope startups can pick up some of the money wasted on gambling and lotteries.

The Act will create new category of issuer, the emerging growth company, which would retain that status for five years or until it exceeds $1 billion in annual gross revenue or becomes a large accelerated filer. These emerging companies can defer compliance with Section 404(b) of the Sarbanes-Oxley Act until the company is no longer considered an emerging growth company. That will reduce costs for new public companies, and that has to be good.

Here is the biggie: the act would remove the prohibition against general solicitation or advertising on sales of non-publicly traded securities, provided that all purchasers of the securities are accredited investors. Right now, the prohibition on advertising is a rather murky area as to whether the issuer had a sufficient pre-existing relationship with the investor. This clears this up, reducing uncertainty and risk. Allow advertising opens the door to greater access to investors for growing companies. However, this may mean that the wolves running scam companies will faster find sheep to shear. Memo to accredited investors – brace yourself, the advertising onslaught is about to start. You need to learn what to buy and what to pass on.

Overall – more innovation will be funded, more opportunity for fraud so more need for investor education in the risky world of start ups and growing companies, more need for private markets, less costs for emerging companies. All in all, not a bad start.,

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Reverse Mergers: And Other Alternatives to Traditional IPOs – David Feldman’s Legal Treatise

How to Pick Hot Reverse Merger Penny Stocks – by John Lux – analysis of deals and trading from a trader’s point of view

Securities Regulations: The Essentials

The Issuer’s Guide to PIPEs

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