How can a small company IPO on a major exchange?

Jason Kirby (00:01.092) Hi, everyone. Welcome back to Fundraising Demystified. Today we have Peter Goldstein with us, founder and managing director of MS Capital and CEO and founder of Exchange Listing. Welcome to the show, Peter. Peter (00:11.742) Welcome to the show. Jason, great to be here. Thanks for having me and I'm excited to have, you know, a dynamic dialogue and share some great insights along the way. Jason Kirby (00:21.38) No, I'm excited to have you on the show. This is a little bit different than our typical audience or typical guests that we have on. We're going to be diving into how companies can go public and kind of what you're doing to enable that. So, you know, I'm excited to have you on the show. So let's let's let's go ahead and jump right in. You know, Peter, you're a capital allocator, you're an author and you help companies go public. It's a pretty unique background. So can you give our audience a little bit about you and what your story is? Peter (00:26.046) guests that we have on, we're going to be diving into how companies can go. Peter (00:34.558) So I'm excited to have you on the show. So let's go ahead and jump right in. Peter, you're a capital allocator. unique background. So can you give our audience a little bit about you? I'll give you the shorter story. It goes back to the childhood newspaper route and making lawns. And I really believe I have entrepreneurial DNA built in me. I'm 60 now. I started my first company when I was 24. And I had my first exit at 30. And so really, for the last 35 years, I've been focused on building companies. It's where my passion lies. And specifically, I would say in the last 20 years, my niche is oriented around the capital markets and working with small and micro cap companies that are either wanting to be public for the first time through an IPO or our existing public company that are undervalued and haven't gotten all the benefits out of being a public company. So my journey has been quite unique in the sense that... One kind of opportunity led to the next. I have been a founder, taken two of my own companies public. I've been an investment banker. I started my own investment bank from scratch. I was fully licensed, sold that, and then really have created exchange listing in Emmis to serve in this niche that is greatly underserved and quite honestly is misunderstood by many people around what's possible for emerging growth companies to utilize and access. Peter (02:13.406) public capital and liquidity in the capital markets. Jason Kirby (02:16.612) Okay, this is gonna be a fun conversation. I have so many questions. Yeah, so let's let's kind of start back at, you know, kind of your role in taking companies public. It will one your companies. So let's maybe start there. Like tell us a little bit about that history and what that experience was like, in terms of building a company that was ready to go public. What was that like? Peter (02:29.054) and what one, your companies, so let's start there, tell us a little bit about that history and what that experience was like in terms of building a company that was ready to go public. You know, before I took my own companies public, I work as an advisor on several microcap companies that had approached me. I was working with them on more traditional scaling, you know, business operations and business systems. And one of them, we were doing some M &A work. asked me to help assist with their going public. And I knew nothing about the process. They trusted me and asked me to look into and educate myself and educate them. And so I cut my teeth back. This is 20, probably five years ago now, Jason, on doing a reverse merger with a private company and a public company, which in Canada and the U S throughout the years has been a one way for a company in the micro and small cap space to. get the access to being a capital market, you know, publicly based company. And along the way, I realized that there is a lot of great opportunities for small to micro size kept companies to be able to access capital and liquidity that wasn't really fully served by investment bankers. So, you know, it's very hard to find a banker that will recognize, you know, the companies of this size. More importantly, what I, what I learned was that the ability to grow your business when private into maturing into a public company, you know, takes time and planning and takes resources. I didn't have a lot of that knowledge when I took my first company's public. Uh, my first one was on the OTC markets. Uh, my second one went on to NASDAQ. So, you know, as a principal and a founder, I made all kinds of mistakes. uh, learned all kinds of lessons, which I now obviously want to bring to the entrepreneurs that I work with and to the audience and to be able to educate those that really are wanting to and committed to pursuing the path of being public. Jason Kirby (04:37.412) So let's start with some education. Walk our audience through the difference of the OTC and listing on OTC versus listing on NASDAQ. Peter (04:41.404) So we focus now on NASDAQ, New York Stock Exchange, and actually the SIBO, which is the Chicago board, which are all senior listed exchanges. There was a time where the OTC markets were much more vibrant for earlier stage companies, kind of to be able to develop and mature as a public company and be able to access capital and liquidity. Unfortunately, a lot of that has dried up. So now we're really focused on getting to a senior exchange because that's where the benefits come. I'm being able to access institutional capital, being able to have the benefits of liquidity and the combination of those are really now where we would work with any company that would want to go public and meeting those listing criteria, which are much more rigorous than it would be on the OTC markets. And this is talking about a little bit more. You're basically saying. Jason Kirby (05:36.356) Gotcha. And let's just talk about that a little bit more. So you're basically saying OTC is not what it used to be. And correct me if I'm wrong, my terminology is wrong, but trading pink sheets is not the thing anymore. You're kind of trading these like super micro cap stocks. Is that something you're just not seeing activity in like they used to? Or what's kind of your take on that market? Peter (05:40.958) is not what you... Yeah, Jason, it's a viable, you know option but there's just not a lot of liquidity there a lot of the institutional investors have mandates that they need the companies to be on a senior exchange, you know, because of the compliance, you know, their regulatory the transparency the reporting. So there's just much less capital and therefore much less liquidity than there used to be. There are still a number of really great companies that are listed on the OTC markets, just like there are in the CSE and the ASX and other kind of junior, I'm gonna call them exchanges for this conversation, but they don't get all the benefits of being public. So we actually work with companies that are in similar situations that are ready to, I'm gonna say graduate to a senior exchange. But yet if somebody was initially wanting to go public now in this market, in this time, I would only be recommending a senior exchange listing. Jason Kirby (06:52.388) Gotcha. And what are some of those benefits of going to a senior exchange? Peter (06:53.598) and whatever. Peter (07:00.03) You know, you can take the obvious ones, right, of access to capital and liquidity. And I'll start with the capital because I think it's really greatly misunderstood, Jason, that a micro and small cap company, meaning you don't have to be a unicorn in order to access institutional capital. There are a number of investors that focus on emerging growth companies, you know, the future stars, right? They have to start somewhere. And as an alternative to venture capital. as an alternative to private equity. There is capital, albeit expensive, just like anything else these days, that is formed to be able to invest in companies that have liquidity events. And then, of course, the value that I believe is much greater to companies at earlier stage is the benefit of the structures and the transparency that are required to meet the listing metrics, meaning... If you can operate your company as if you were already public and then an existing public company, it comes with much greater transparency, you know, oversight systems, controls that really benefit the entire organization and all of the stakeholders that are a part of it. Jason Kirby (08:17.316) What are some of those criteria? What stages does the company need to be at before they would even start considering this process of going public at the scale that you're talking about? Peter (08:27.55) So, yeah, so let's frame it, Jason. So there's small cap and micro cap. Small cap really starts $300 million market cap or above. Let's take it up to a billion. That's a very wide range. It's a wide berth of companies. And then micro cap would be $50 million to $300 million. There are nano cap, but they don't really fit this conversation. That would be more of the OTC or earlier other platforms. So where we're looking at micro cap companies, that definition of $50 million market cap, which is simply defined as your price per share times the number of shares that you have issued and outstanding to give you an overall market capitalization. Jason Kirby (09:13.636) Yeah. And when you're coming from the private markets, which most of our audience is coming from, you know, venture backed or private equity backed companies, you know, they think of, Hey, I'm raising $10 million, giving up 20 % of my company. We're a $50 million market, you know, or, you know, value it. You know, we're valued at $50 million is, you know, that's not necessarily equivalent in this case. Correct? Like what, what's kind of the underwriting that's required and like, what kind of revenue are these companies at? Peter (09:22.398) Hey, I'm raising $10 million. Peter (09:32.094) is that's not necessarily equivalent in this case, correct? What's the underwriting that's required and the revenue that these companies have that would typically fit the criteria to go public on these? Jason Kirby (09:41.86) that would typically fit the criteria to go public on these kind of the micro cap numbers or small cap. Peter (09:48.926) It is actually similar in the beginning, Jason. It changes over time because then there's a mark to market on your stock. One of the pitfalls of being public is that that's a volatile market cap, right? You know, especially in this market, you know, stocks are opening up below issue, but they start off with that same formula, you know, with evaluation and that valuation is typically entered into with the help of the investment bank. course, with comparable companies and comparable valuations that are defensible. But really, it gets said initially by the investors that are participating in the IPO. So as much as every entrepreneur I know, including me, when I took my companies, we think all of our babies are perfect, and they're absolutely beautiful, and therefore, they should be getting the ideal premium. It's just really between the investors. negotiating, you know, and that's where the old auction came from, right? In the IPO process, where it's going to be dependent upon the market. And that is something that happens dynamically at the time companies are ready to go. And now, of course, you know, companies can test the waters. There are a lot of tools they can utilize to determine if the market is going to be receptive and it will meet their valuation in this environment. Down rounds are happening on a fairly regular basis, meaning that. The private or last round that was done would be at a higher rate than the current round is being done to access more capital and potentially even to access liquidity. Jason Kirby (11:23.332) So for a lot of companies out there, they're dealing with that exact problem. Down rounds or some pretty aggressive liquidation preferences or preferred shares that have certain premium rights over the common. Is this a way or an option for companies to maybe eliminate some of that baggage on their cap table by going public? Peter (11:32.798) It is you know depending on those nuances Jason right like every every you know I want to do the blanket disclaimer that that's specific to the type of structure right, and the criteria of their prior capital rounds, which we'll talk about probably later about some of the better practices to be leading up to a public liquidity event. But it is an option and often there are conversions of those preferred shares and or debt that can come along with a liquidity event. So the balance sheet can often get cleaned up significantly and you have access to new and fresh capital. And typically, you know, what we're seeing, especially now more these days are where the pockets of venture capital or private equity that the companies had utilized before are no longer available to continue to invest either at the same level or even lower. So there is more optionality. And I think the message I want to give, you know, you and to the listeners is that there's much more access than people realize at the small and micro cap level, because most. People are kind of ingrained in the fact that, oh, you have to be a unicorn, VC backed with a hundred million in revenue, you know, 15 to 20 % EBITDA, 30 % growth. That's just not true. Those are myths that got created on Wall Street, largely driven by, you know, the dot -com bust where, you know, it was seen that if you're too small and too early, you're too high of a risk. Well, 25 years later, a lot of those myths still remain. And I'm here to tell you that, you know, that's just not reality. Jason Kirby (13:29.508) So let's talk a little bit about your firm, both the capital allocation firm, the fund, as well as Exchange Listing, your firm that helps companies go public. Tell us a little bit about what you're doing at these firms to kind of help companies navigate these options. Peter (13:49.95) So I'll start with the exchange listing because that's the advisory side and it's really the heart of our business. You know, we look at especially in this market that you want to take 12, 18, maybe even 24 months before you're ready to be public to get prepared to be educated. So if you're a large cap or a mid cap, you're going to go to Deloitte, you're going to go to a McKinsey, right? You're going to get to Accenture. If you're small cap and micro cap, There are not that many options. So we create, I specifically created exchange listing to satisfy this need and the need being, you know, really interesting, dynamic, emerging growth companies whose management is committed to going public and need someone to advise them through the entire landscape. So of course they could go to a banker or they could go to a lawyer or they could go to their accountants and auditors, but they don't necessarily have the entire ecosystem. Nor do they have the time, the perspective to be able to work with the management team and all of their stakeholders and the board members to prepare them. So we have a wire frame that could take anywhere from six, 12, 18 months to walk the companies through all the varied aspects and the dynamic nature of being prepared for and educated before you even begin executing. So in a perfect world, I would say to a company, take a year and start to develop. your systems, your reporting, start drafting your SEC requirements, start building your board, right? Start operating inside of what it would be, just like going to the gym and flexing your muscles. You know, you need to develop that over time. You don't just get, you know, buff and ripped overnight. These are criteria, you know, that over time will prepare you best for that eventual event. And that's what that's our role. We then work directly with the exchanges. I talk regularly with NASDAQ, New York Stock Exchange American, the CBO, in understanding when a company is ready to apply what the process is, what's needed to satisfy the listing requirements, both quantitative and qualitative. We work within the investment banking community. We introduce our clients to select investment bankers looking to make that match between the bank and more specifically the banker. Peter (16:12.766) and the company who's going to be the champion of carrying that company to market. Same with the auditors, same with legal, really the entire ecosystem that I've been operating in for 20 years now as a resource to flatten the learning curve, the cost, and the timeline for companies to prepare to go public. Jason Kirby (16:32.548) So I imagine, you know, you've done this obviously a handful of times, not only for your own businesses, but for your clients that you've serviced. What are some interesting stories you've kind of been through dealing with helping these companies, you know, go public? Like, what are some of the horror stories and what are some of the success stories that, you know, really shaped your business? Peter (16:48.944) Wow. There are so many, Jason. Every time I think I've seen it all, right, like I'm 60, I've been doing this for a long time. And that's part of what I love about what I do. Because just like the markets are dynamic, as is the process of taking a company public. You know, the crescendo, right, that kind of beautiful moment of going to a bell ringing is really just a phenomenal event where all the hard work. comes together in a moment of celebration. I had the benefit a few weeks ago of going to the Chicago Board of Exchange, which just began listing companies. They've been historically futures, commodities, and in trading ETFs. So we did the first actual issuer IPO at the CBOE. And so I got to basically participate in that bell -ringing event. Jason Kirby (17:32.484) Come on. Yep. Peter (17:47.614) with the company, which is an AI company. And it really is a very rewarding work after that was about two years of volatility in the market and being able to overcome challenges to be able to actually access capital for the company to successfully list and trade. You know, I could give you, I could talk to you for days about the war stories, my own included. I think like I made so many mistakes because I didn't have guidance. and I didn't know better. Jason Kirby (18:17.124) What would be one of those mistakes? Peter (18:20.254) I'll give you a classic. So when we filed our, this is my first, when I took my first company public, I didn't know the difference between how to interact with the lawyers and with the security exchange commission. And I had a young lawyer who I still work with now 25 years later, and we were so focused on diligently addressing every question that came to us from the SEC. And, and exchange, cause it's a dialogue. The SEC asks you questions, they provide comments and you provide a response. And we, I went on for 13 months discussing certain things in dialogue with the SEC that really could have very easily been answered without challenging and trying to prove a position of fighting over dotting an I and crossing a T. Right. So, you know, young early stage, you know, kind of didn't have the big perspective. And what should have taken six months ended up taking 13 to 14 months as an example. And those are hidden costs inside of going public. If you're spending twice as long in a review process, paying for legal, it's restricting you from being able to enter into accessing capital and liquidity. So that's just one that comes to mind of an early learning ground. Now, as I do this, First of all, we have the knowledge base where we write the SEC perspective in conjunction with the lawyers. So the lawyers do the legal component, risk factors, all the disclaimers, all the national, right? We focus on the company's message and the company's particular position and value proposition. Cause that's a historical document when you write an S1, it's something that's a legacy document that lives for the lifetime of the public company. And, and with inside of that, If the SEC comes back and says, we'd like you to reposition this language or that language, now we work with them and we complete that. And then we move on to the next task, as opposed to taking, you know, extended periods of time to prove the point that we want to dot the I and cross the T. So there's, there's many, um, you know, the biggest mistake I think that, that company entrepreneurs make when they're taking their companies public is that they underestimate the amount of hard work. Peter (20:44.35) that it takes not just to get there, Jason, but then you first have to then begin operating as a public company. And you're under almost immediately an immense amount of pressure. And now you're operating a second business line, which is managing the public side while you're still responsible for managing the operational side of your business. Jason Kirby (21:06.692) Yeah, that's an important component that I imagine is a bit of a shell shock for founders once they get to that point. What's something where you had a situation where you kind of go in, everyone's kind of got their expectation of like, here's the goalpost and maybe ring the bell, maybe don't ring the bell, but like, what was something where you just got completely derailed or something that was just such a shock to the plan? What was the situation where that happened? Peter (21:14.43) What, what's something where you have a situation where you kind of go in and everyone's kind of got their expectations? Peter (21:24.67) Maybe you ring the bell, maybe you don't ring the Peter (21:33.342) was a situation where... Peter (21:37.47) Well, if I, if I think about recent ones, it's where there have been assumptions made in the financial projections. And it's, it's great learning grounds. Great question. So, so many entrepreneurs are forward looking and based upon their own experience and their belief and their set of that entrepreneurial kind of grid that they believe they're going to be able to go out and produce a certain amount of revenue or produce a certain amount of contracts. Uh, more than often in this environment, those things take longer, uh, cost more. And, and where I now look really with, you know, the very fundamentals of testing out an early stage growths companies, assumptions for their revenue and everything that goes into the financial modeling. And in, in, in recent, I will tell you that there have been really superb management companies that were VC backed that had great projections. their assumptions didn't hold up and it really caused significant setbacks. When investors realize that what the company has been projecting and that would be the basis of their valuation and the return on their investment isn't valid. Jason Kirby (22:53.508) That's harsh. That's a harsh reality. So we talked a little bit of the doom and gloom or the tough stuff. Let's talk about some of the positives. So company decides to work with you or in general, pursue the going in public. And what's the situation like? What happens? Okay, you get to that point, you ring the bell. You have all these responsibilities of running a public company, but what are some of the... Peter (22:56.542) It is. Peter (23:05.342) science that work with you or you know pursue the And what's the situation? Like what happens? Okay, you get to that point, you ring the bell, you gotta get all these responsibilities right. Jason Kirby (23:21.396) positives beyond just access to more capital because you can raise money in various different ways once it's public. But what are some of the net positives that maybe aren't as obvious that have occurred for some of the companies you've worked with? Peter (23:22.526) I think there are two that come to mind, Jason. One is the ability to use your stock to attract management, right, inside of employee stock option plans, to attract human resources. You know, we're all struggling to find the best people. that we can to work for organizations to grow and scale our organizations. One of the great ways to be able to do that is to motivate and reward them with another currency outside of their cash compensation. And then I take that further where you could use that same stock and that currency to go out towards strategic partnerships, to go out towards M &A opportunities, to be able to make acquisitions utilizing your stock as another currency. Jason Kirby (23:52.492) Hmm. Jason Kirby (24:09.284) you Peter (24:19.39) And that, that leads to what I think was one of the undervalued benefits of going public, which is the credibility that your brand gets. So we also work with a lot of foreign issuers, Jason, who want to come to United States one because of the capital markets and access to capital, but also to bring visibility to their product, their service or their technology when they want to scale and grow. And you don't need to be foreign in order to benefit from that. You know, think about the value that you're getting. of ringing a bell and whether it's NASDAQ, New York Stock Exchange, just the footage, the coverage, the exposure that that gives to your brand, millions and millions of dollars worth of value that you're not paying for directly, right? It's an indirect benefit. And then of course, because now you have proper governance, you've met all the listing criteria, any particular, I would say future business opportunities. you are overcoming such hurdles that other small to medium sized companies might otherwise have a challenge overcoming. Jason Kirby (25:23.94) And as you're sharing this, you know, something that just always kind of sticks with me is, you know, it's become more and more commonplace in terms of topic gets brought up. Like companies are staying private longer. You know, you go to the eighties, nineties, and up until basically the bubble, everyone was going public super early. Oh, early compared to what they are now. You know, now companies are waiting to be a billion dollars in revenue before they go public. Peter (25:24.926) you're sharing this, you know, something that just always kind of sticks with me is, you know, and it's becoming more and more commonplace. Peter (25:35.806) You know, go to the 80s, 90s, and up until basically bubble. Everyone was going to public super early. Early compared to what they are now. You know, now companies are waiting to be a billion dollars in revenue before they can go public. Why are they even waiting so long, especially when we're such a... Jason Kirby (25:51.46) Why do you think they're waiting so long, especially when we're such a dry market right now, like everyone's starving for liquidity. There seems to be so many benefits to going public. Obviously, there's market hesitancies. Oh, are they going to drop at going public or whatever? But there just seems to be so many net benefits. You know, why are investors and founders wanting to stay private longer? Peter (25:56.702) starting for liquidity. There seems to be so many benefits to building public. Obviously there's market incidences, oh they're going to drop. there just seems to be so many net benefits. Why are investors and backers wanting to stay private longer? Yeah, it's a great conversation. I don't think there's any one particular, you know, specific issue. I think it's a whole host of issues that are often very specific to the company itself or also to the financial backers, to the VCs or the private equity investors. And I think largely, You know, the answer lies in economics right now. Unfortunately, you know, many issuers have done their IPOs open up slightly above and then dip below their issue price. And that penalizes shareholders. So on the one side, you have access to capital and liquidity. The other side, there's downward pressure. And I think that downward pressure, the cost of going public, you know, the pressure, the negative potential. impact on your price of your stock are very practical reasons why one would not want to consider doing that in this environment or quite honestly in any environment. It's just now more so than ever. Jason, there's just tremendous pressure. There's a lack of quality capital, whether it's VCPE or the institutional side, it's across the board. Right. There's more money in the sidelines now. in every one of these areas than there has been, you know, maybe in our history. Right. So for those companies that are going public, there's an extra component of downward pressure and a lot of the money is is fast money. Right. There there the the prior round of capital may be locked up. The new round of capital is in a superior position. And often they're looking to get liquidity out as quickly as possible. And that puts. Peter (27:57.79) you know, a very kind of challenging position for companies when they're also under pressure to be able to perform, hit their growth numbers, hit their milestones and manage, you know, these kind of negative pressure of being public. Jason Kirby (28:11.14) So my oversimplification of that is private investors have kind of overinflated some of these investments that they've made to the point where the company hasn't yet grown into the valuation that the public markets respect or would value. And so therefore there is that immediate down pressure to go public kind of forcing these companies in this kind of conundrum of Peter (28:19.294) some of these investments that they've made to the point where the company hasn't yet grown into the valuation that public markets respect or would value. And so therefore there is that immediate down pressure to go public kind of forcing these companies in this kind of conundrum of staying in the status quo knowing that if they go public there will be. Jason Kirby (28:39.498) staying in the status quo, knowing that if they go public, there will be some carnage to kind of face, given that they benefited from the overvaluations in the private markets over the last several years. At least that's my interpretation of what's going on and what's withholding people from jumping into what could be a much more positive situation for their company. Peter (28:45.15) Yeah, it's it's it's a important aspect and I agree with you in the sense that you know, the valuations have gotten so high. and so overinflated and then there has to be, if you're going to go out for another round, there's going to be potentially an adjustment. But more importantly, the market's going to seek its own level. And then if you add in the complexity of shorting and naked shorting and machine trading, it gets, you're exposed where if you stay private, you don't have as much exposure. You don't have as many variables. You don't, as long as you can access the capital. Then, you know, and as you look at it now, as I see the IPO market, there's a pipeline of companies that are waiting. And this is really one of my messages to your listeners for anybody who's considering going public. Get ready now. Be prepared. You know, it takes six, nine, 12 months to be ready. Right. When the window opens here, which we know it will, Jason, it's just a matter of time. You want to be in a position to take a shot on goal and score. And if you're flat -footed and whether that's in your private equity side or the VC or in your pathway to a liquidity event, you could potentially miss the window. So I'm a very big advocate for management to start now and use the time to prepare. And even if you never go public, your organization will benefit greatly from the practices you put into place. And that's why I wrote the book that I wrote. I want companies to understand the practical nature. and the benefits of being prepared and organized for an eventual liquidity event. Jason Kirby (30:48.26) So I want to kind of get into what type of companies you're looking for and think should pursue this option and start the process of getting ready. But before I do, I want to talk about kind of what happens to those early investors. After the situation we just talked about, and say this window does open, people start going public. Those earlier investors that called the angels, the pre -seed, the seed round investors that got in real early. Peter (31:05.182) So this window does open, people start throwing up. Those earlier investors that, you know, the angel, the pre -CEC, the C brand, investors. Peter (31:17.31) They're kind of at the bottom of the press stack. They're kind of locked up, they have no control, very little influence. The company goes public. Most everyone's going to get converted to common in most cases, correct? Correct. Multiple share classes are pretty rare. What do you see typically happening to these earlier investors that have been locked up for 5, 10, 15 years in comparison to those, as you say, fast money investors who come in last, top of the press stack? Jason Kirby (31:17.572) They're kind of at the bottom of the prep stack. You know, they, as you say, they're kind of locked up. They have no control, very little influence. The company goes public. You know, most everyone's going to get converted to common in most cases. Correct. You know, multiple share classes are pretty rare. What do you see typically happening to these earlier investors that have been locked up for five, 10, 15 years in comparison to those? as you say, fast money investors who come in last, top of the prep stack and want to get out fast. Peter (31:47.07) Yeah, it's one of the dynamics, Jason, of the capital markets and, you know, those last money in gets to kind of call the shots. So what we see for the shareholders that are the legacy and the historical shareholders maximum is a one year hold. Depends on the underwriter and how many shareholders and what the diversity is in the cap table. to six months to, in some cases could be three months. It's a, on a case by case situation. Six months would be kind of more of the sweet spot. And that's why when you see IPOs come out, there's often a window of being able to look to see what happens in the six months when those lockups come off. Because then there are, then there's more sellers that come into the market. And that's where, you know, you can see stocks get again under pressure where there's more selling than there is buying. So, you know, a lot of investors look. specifically for those timeframes and to be able to see where they fit. For the shareholders that got in early, once that lockup is taken off, then they're in a position to be able to sell. And so, again, my practical advice for those investors is get all the paperwork and all the documentation that you need to be ready. So then that leak, when the lockup comes off, you're in a position to liquidate should you want to. And I think it's really important to understand and follow the company. If you've been a shareholder for that long of a period, understand how the company's performing, what the key metrics are, follow them, track them, and don't be in a quick rush to want to sell just because of liquidity. You believed in the company back then. Take a look and understand where the company is going. Are they on track to meet the growth milestones, which would ultimately increase the ROI for you as a shareholder? Being locked up is not necessarily a bad thing. I know there's a negative connotation to it, but it happens with me all the time. And if I believe in the company from day one, then I believe in it six months later, 12 months later, as long as that management has continued to perform the way that they have when you bought into the company back in its early stages. Jason Kirby (33:57.06) Good advice. So let's talk about the types of companies that you think are a good fit, not just for your services and what you do at Exchange Listing, but are a good opportunity at that kind of micro cap, small cap range to go public. What are you looking for? Peter (34:00.542) that you think are a good fit, not just for your services. you. Peter (34:15.454) You know, it's a little cliche, Jason, but it starts with, with the jockeys. We're betting on management. You know, when you have an early stage company, whether it's outstanding technology service product, you know, they're all going to demonstrate similar characteristics. That ultimate hockey stick growth and the ability to grow exponentially and build and provide an ROI. And you can get a, you know, anywhere from a two to a 10 bagger, you know, that's kind of the, the, everyone's looking for the same thing. We start with management and then the fundamentals because we know that in earlier stage companies, things go wrong. Markets change, industries change. You know, there's issues that they can control and those that they can't, you know, we're just coming out of, you know, just take COVID. It's like, you know, it had completely reshaped, you know, the face of what it could be for a trajectory for company for both good and bad. So if you're focused on the management, and you believe in the management and then build in the controls and the systems and the structures to support their growth track, knowing that that may change, that they may take on variables. That's what we look for. And obviously there are hot sectors. You know, we just did an AI deal. We're looking at consumer product. We're looking at tech. We're looking at, we're very big on life science, you know, a medical device happens to be an area. I personally, I'm interested in companies that are doing good in the world and are also ability, you know, capitalist, right? For for -profit and, and for, you know, kind of social good. So, you know, I'm a capitalist and I believe me, I'm, I'm all about making money, but at this stage, it's the combination of those two that really get me motivated, you know, to work with dynamic entrepreneurs, you know, visionaries who have taken their company to a certain level. and are ready to get into the next level of growth with a catalytic event. And I see what we do. MS, our fund, we consider it our catalyst. And that catalyst is to be able to give sometimes what I would call special situation capital. Could be last mile capital, but it's critical to be able to get to the next event. And so we invest as well in companies that we see with... Jason Kirby (36:15.78) you Hmm. Peter (36:37.342) the right positioning and the right capital behind them can make some exponential growth with that catalyst being both the capital and the trajectory to lead them on to the senior exchange market. Jason Kirby (36:51.01) No, it's great to hear. And just to put it clear to the audience, you kind of gave like, okay, sector, but like, what milestones these companies need to be at? Like for the companies that you're working with, are they doing, you know, 5 million revenue, 50 million in revenue, 100 million in revenue? Does revenue even matter to you? Like, what, or what other kind of KPIs matter to you when it comes to? Peter (36:54.366) Just to, you know, put it clear. Peter (37:02.462) these companies need to be at. The companies that you're working with, are they doing, you know, five million? Peter (37:12.83) So we've done five we've done 50 we've done a hundred million in revenue so and we've done pre revenue Those are typically life science oriented Jason right so medtech life science where you know, they're developing their pathway to to revenue Jason Kirby (37:18.724) you know, working with these companies and getting them ready to go public. Peter (37:38.974) For us, it's really about market capitalization. Do they fit inside of a capital structure? And do they have enough traction in the market? So I don't focus on revenue, focus on the overall value of the company as it stands today and where that value could be 12, 18, 24, 36 months down the road. And then it's really from there, What we do is we reverse engineer the requirements to meet an exchange. So if we have bought into the company and we believe that this is the right candidate and they are committed. And I, I, I emphasize committed because this is not for the faint of heart, right? You really have to be committed to want to go down this pathway. Uh, then we partner with them and, and I take equity positions in these companies as a way of showing that we're really partnering. It's not a transaction for me. In a sense, I'm a portfolio investor in what we do with our companies, both with capital and with services. Jason Kirby (38:43.458) Okay, so that helps kind of clarify quite a bit in terms of where companies might fall online and in terms of pursuing this. But from an expense perspective, like let's just say a consumer brand doing 20 something million a year in revenue, maybe markets are giving that a one to three X, maybe four X multiple, maybe that's somewhere in the range of a micro cap. Peter (38:51.742) doing this from an expense perspective. Like let's just say a consumer brand doing 20 something million a year in revenue. Maybe markets are giving that 1 to 3x, maybe 4x multiple. Maybe that's somewhere in range. Jason Kirby (39:13.188) but it's gonna cost money to play this game. It's not gonna be something that they can just show up and get prepared, do all the necessary prep and then actually run the process, pay for all the legal investment bankers, all kinds of like, what kind of cost go into this process from a company's perspective? Peter (39:33.438) So there's a range, Jason, based upon the depth and the complexity of the company. And what status are their financials? Are there audits? Have they been audited? Financial reviews, so on and so on. Subsidiaries, there's legal structure, right? So there are a lot of variables that go into that, but I can give you a range. A range would be probably a half million to a million dollars with the way that we structure this, because we're very frugal. Uh, and, and, you know, be very careful about the utilization of capital towards the costs of going public. Right. And, and, and then there's a different carrying costs once you're a public company, which could be a million to even $2 million a year, depending again on size, complexity, you know, you have D and O insurance reporting costs, you know, audits, you know, legal, there's a whole extra burden. So that's part of the decision -making of is the reward. going public big enough to want to go through and that's where our funds, so at Emma's Capital, we actually provide capital to cover those costs of going public. Because many of these companies at that stage of inflection don't want to take capital away from their operations. They want to put everything they have into growing their business. And I support that wholeheartedly. So how do you then prepare and how do you build that bridge? Jason Kirby (40:34.02) Mm -hmm. Peter (40:58.718) And that's where this last mile capital that we provide. And then we bring in strategic partners in the way of legal investment banking that are going to minimize the costs in the front end and be committed to the outcome on the back end. So you have to be prepared to spend money. There is access and unique cases to capital that can help to cover those costs. But if the company is well capitalized, I would put together a budget of a half million to a million dollars. to get you through the preparation, the execution and leading towards, I advise everybody to have two things when they go through the process, a healthy balance sheet and access to their own capital to bring to the IPO. Jason Kirby (41:43.236) Gotcha, so they need to be bringing capital to the table for the IPO. They've got to have some investors already teed up on those relationships already ready to go before coming to this process. Peter (41:47.358) They've got to have some investors who are AT &T. Peter (41:54.326) coming to this process. Yeah, mistake 101 that I made where I counted on the fact that the investment bankers, even though I used to be one of them, would be handling bringing all the capital. In this market, especially, Jason, the more capital and more support that the company brings issuer, right, stakeholders, additional capital, the stronger they go into an IPO. And there are some bankers that will actually almost mandate that from the company. You know, in order to be able to take on and have a successful event. Because demand for a new issue can change. But if you have existing supporters and you have existing capital and new capital that's coming along with you, it's a very simple adage, right? You're coming in strong as opposed to coming in in a weaker position than one would be ideal in this kind of marketplace. Jason Kirby (42:47.908) You know, I'm so glad you mentioned that part because I have a feeling there's a lot of people listening, saying like, this is my shot to bring in new capital. And then whoop, pull the rug out. At least, at least they see it before it happens and they know they got to come prepared. And, you know, they, they got to keep those relationships, maintain those relationships. And, but like they, those relationships might be there. They're just not interested in investing as a private option, but as a public option, they would be. And, uh, Peter (42:51.998) Yes, I'm sorry. Peter (43:05.51) They are, keep those relationships, maintain those relationships, and, but like, those relationships might be that they're just not interested in investing in something else. Jason Kirby (43:18.052) You know, so that it could at least create a more fruitful conversation for other investors. But I think that's an important kind of caveat that you mentioned for founders to be aware of. Peter (43:18.91) could at least create a more fruitful conversation for others. Peter (43:28.094) Yeah, I think it's critical, Jason, like lessons learned, right? So pro tip is maintain a very close relationship with your existing shareholders. Constantly be building relationships with potential new shareholders. And more importantly to me is, you know, understand that this is a dynamic nature, whether you're private or you're public, you cannot have enough support from a shareholder base. communicate with them regularly, keep them updated, share the wins and the losses. None of us as CEOs are perfect. We all make blunders and mistakes. Own them, communicate regularly, build that support. And the stronger you have that relationship with your shareholders, the more sticky they are. And I think that that's something that many CEOs going into the public markets and the IPO don't understand and they don't necessarily even get to know the new investors. And I think it's critical when you're on a road show and you're interviewing investors, they're interviewing you get to know them. Make sure that you have a good sense of who's going to be on your, on your cap structure and in your cap table, leading into the event, the event itself, and then manage your shareholder list thereafter with an understanding that your goal is to build the broadest, most dynamic shareholder base you can as a public CEO. Jason Kirby (44:49.7) That is some incredible parting advice for our audience to be aware of and to start maintaining those relationships as early as now. Seed stage and on and never let those kind of fall apart or falter and kind of maintain those relationships. Cause that's also said the president for when you are public and running a real IR process. So I appreciate you sharing those insights. Peter, where can people learn more about you, your book and your firms? Peter (44:54.75) start working, you know, maintaining those relationships as early as you know, seed stage and on and you know, never, never. Peter (45:11.358) I appreciate you sharing those insights. Peter (45:19.26) Easiest thing is just go to LinkedIn. I'm very active on LinkedIn. I like to give away a lot of content and value and information. It's part of how I've built a real strong network around me. So just look me up on LinkedIn and it's got information both about Exchange Listing and MS Capital. We're about to invite new accredited investors to MS Capital so people can take a look at that. We did a founders round with phenomenal returns. So I'm excited to be able to expand our base of accredited investors. And if you're interested in the dialogue with me, just send me a direct message. I'd be happy to connect. Jason Kirby (45:53.188) Awesome. And any final words you want to share before we wrap up today? Peter (45:54.238) And any... Peter (45:59.294) I just, I think, you know, you and I are aligned in wanting to bring knowledge and education and insight to the entrepreneurial community, you know, when it comes to accessing different forms of capital and growing companies, you know, that's the kindred spirit amongst fellow entrepreneurs. So it's been great chatting with you. You know, I hope it brought value to the listeners and I look forward to, you know, ongoing conversation. Jason Kirby (46:23.62) Awesome. I'm sure people loved it and, uh, you know, look forward to people starting to reach out to you through, through the podcast and, uh, you know, being able to take lessons learned from, from what you shared today. Awesome. Going to go ahead and stop. Peter (46:31.326) Great stuff. Thanks Jason.