The push toward an IPO is largely driven by how Venture Capital works. VC firms manage money from limited partners and need to return that capital within a set timeframe, usually 7-10 years. An IPO gives VCs the liquidity they need to convert their equity into cash. To hit the valuations required for a successful IPO, VCs push startups to grow as fast as possible, since public market valuations are typically based on revenue multiples and growth rates.
The reality is that the odds of actually reaching an IPO are incredibly slim. Looking at Israeli startups founded since 2000, out of more than 20,000 companies, fewer than 100 went public. Only 38 achieved a valuation above $100 million at IPO. That’s roughly a 1 in 500 chance of a significant IPO.
For a company to even be considered IPO-ready in major markets, certain financial benchmarks are generally expected. Annual revenues of $100 million or more, year-over-year growth of at least 20%, and increasingly, profitability.
The SmartUp methodology views an IPO as a “Finite Game.” Once a company goes public, founders often lose their independence as management shifts toward meeting the quarterly expectations of public shareholders. Instead, SmartUp encourages founders to focus on profitability and build for the long term, what we call playing an “Infinite Game.” This means creating a sustainable, independent company where an exit becomes a choice, not a requirement.
