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Startup to IPO - Startup Joint Venture

New SEBI guidelines on a separate platform for startups looking for an IPO are aimed at giving young companies easier access to capital and bring in a new class of investors.

For young, growing startups, an initial public offering (IPO) may no longer be a distant dream. For some time now, the market regulator and stock exchanges have been working on making an IPO easier for startups.

The big change in the new IGP policy framework is that it does away with the earlier requirement for a company to show its financial track record for the previous three years. Now, the track record requirement has been done away with, though the guidelines recommend that companies should have raised at least a Series B round. This often occurs early enough in a startup’s journey.

But not every startup is a high-growth company. Many struggle to raise growth-stage funding: i.e. Series C and beyond. So a separate platform that allows them to raise funds from investors besides VCs and private equity (PE) firms is a welcome move.

An IPO would throw open the door for participation from a wider class of investors, including mutual funds, high net worth individuals, financial institutions, etc. It would also give angels and other early investors a much-needed exit route.

Startups looking at IPOs through this route will be able to raise capital much more easily and will also have greater operational freedom. Industry observers believe that an IPO through IGP will create a “level playing field”.

The criteria for listing

The criteria for listing According to BSE, the startup platform will facilitate the listing of companies in sectors such as IT, ITES, biotechnology and life science, 3D printing, space technology, ecommerce, hi-tech defence, drones, nano- technologies, artificial intelligence, big data, virtual reality, e-gaming, exoskeleton, robotics, holographic technology, genetic engineering, variable computers inside body computer technology, and any other hi-tech company.

Sinbex will make the Startups to Qualify the criteria for the listing as below :

  • The pre-issue paid-up equity share Capital of the company should be minimum of Rs 1 crore.
  • The company should be in existence for a minimum period of 3 years on the date of filing the draft prospectus with BSE.
  • The startup should preferably have an investment by QIB investors/ angel Investors for a minimum period of 2 years at the time of filing of draft prospectus with BSE, and such aggregate investment should be at least Rs 1 crore.
  • The company should have positive net worth.
  • The company should not have been referred to National Company Law Tribunal (NCLT) under Insolvency and Bankruptcy Code, 2016.
  • There should be no winding up petition against the company that has been accepted by the National Company Law Tribunal (NCLT).
Startup to IPO

Broadening startups’ reach through SINBEX

The listing of startups on such alternative investment platforms broadens their reach with the investor class.

Sinbex Taking care of the challenges ahead :

However, there are certain challenges before startups can start thinking of taking the listing route.

At the same time there are also certain inherent issues in terms of getting the momentum on such trading platforms.

The biggest challenge on such platforms is the lack of participation from the retail class of investors, who actually provide the momentum.

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