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Posted September 16, 2025 at 1:16 pm
A deep dive into IPOs, unicorns, and startup liquidity with Jeffrey Fidelman, CEO of Fidelman & Company. From venture capital to public markets, this episode explores the journey, myths, and mechanics behind going public.
I’m Mary McNamara with Interactive Brokers, and we’re going to about IPO and all related items today. And I would like to extend a warm welcome to our guest today, Jeffrey Fidelman, CEO of Fidelman and Company. Welcome Jeffrey.
Thank you so much for having me, Mary.
Good. So, since you’re to have you, why don’t tell us a about yourself, how you got started.
Sure. We only have a limited amount of time, so I’ll keep it relatively brief. But my background, I graduated Harvard. I spent the better part of a decade in banking between Morgan Stanley and then HSBC, and I was then asked to help a family office run a venture fund. I was a partner there and the thesis was to invest in early-stage tech and tech enabled companies and help the founders syndicate the rest of the capital for their raise.
And fast forward a few years, in 2015, I left, and I started this investment bank, which over the past 10 years has grown to about 40 people. All remote, all US and Canadian based. And what we do is work with early-stage companies. We work with emerging managers as well. We can be helpful with all their fundraising preparation, so things like decks, models, valuation, capital structure design.
Everything’s done in-house, and really what we offer them is something that we call fundraise as a service, which effectively is outsourced investment relations. So, we’ve gone out and subscribed to Pitchbook and Preqin, FINTRX, Dakota, a variety of other platforms. We’ve aggregated it into kind of a single database internally, and then we layer an analyst and a workflow on top of that so that Alex, the analyst, is calling from ABC Company, or Alex is emailing from abc.com.
So that from the investor’s perspective, it’s the company reaching out to them directly and not a third party. Thus, the third-party investment relations team that I mentioned earlier. So [that’s what we do today.
Interesting. That sounds like a great business. Okay, so let’s just start with the basics here. Can you walk us through what an IPO actually is and why a company might choose to go public?
Sure, I will answer that in reverse order then it was asked. So why a company would choose to go IPO. Is really for liquidity purposes most of the time. And I say that because in any business that is growing, especially ones that we start working with at an earlier stage, and as they continue to grow into a later stage, there are a number of investors that start participating in that business.
And that business is oftentimes using that capital to fuel further growth as opposed to taking that capital in and paying dividends or any type of yield to investors out. So, what ends up happening is that over the course of 5, 7, 10, 15 years long periods of time, the company has accumulated investment positions from a variety of different investors at different times.
Some invested day one, some invested, year five, some invested year 10, and when investors put their money into a company, they’re doing so for the future gain that they will get in some sort of liquidity event. So, for a company to have that liquidity event for its investors, there’s typically either an m and a transaction, meaning the company is bought out by a larger or similar business.
And in that buyout, the cash received is distributed to the common equity holders or the IPO, which you were asking about. So, an IPO allows all of those investors that have. Positions inside of that private company that when it does go public, either immediately or after a certain restricted amount of time, that now my normally illiquid shares in a private company are now liquid shares in a public company, so that I can sell those shares and receive the money back that both I put in.
And hopefully if the company has done really well, I can receive the gain on my initial investment. So that’s really why companies would choose to go public so that they can provide a liquidity event to their investors. IPO stands for initial public offering, and that’s really when a company is at a certain size has chosen a certain marketplace to list on whether it’s New York Stock Exchange, Nasdaq.
NYDIG, OTC, QB. There’s a variety of different publicly listed options here alone in the us and if you go into Canada, there’s a number of, there are a number of others, the Toronto Stock Exchange and kind of others around that. So, taking a company public is not necessarily an easy task. There needs to be. There needs to be a really, a business behind it, especially if you’re going after the larger exchanges that you’d like to list on. Meaning you have revenue, you have profitability. In often cases especially nowadays where we’re no longer, 10, 20 years ago where you had [00:05:00] an Amazon being public, losing a ton of money, but people still investing heavily in it.
So that’s really both why a company would want to go public as well as what it looks like to take a company public.
So, unicorns get a lot of attention. What does it take for a startup to reach that 1 billion valuation and tell us what unicorns are anyway and not the horn coming out ones!
Mythical creatures. Right? And I think that’s really where it started coming from when, unicorns. Have a constantly changing definition when it comes to descriptions of companies. And although tongue in cheek, it really stemmed from, the horse with the horn being an outlier, mythical creature.
And so too were companies that reach these billion-dollar valuation marks. And now we hear about Decacorns and Cent Acorns, right? These companies that are reaching 10 plus billion valuations or a hundred billion valuations. But the reality is in the market that we’re in a unicorn by definition, similar to what a lot of people look at as seed round as has constantly changed.
And I say that because 10 years ago, if you were raising a seed round, you were looking for seed investors, a company. To seed right? What’s in the name, A seed investor. Nowadays, seed investors are looking for a million dollars in a RR at minimum to invest in a company. So similarly, when you’re looking at a unicorn without the deck of corns and cent coins and etc. that I was joking about, you’re really looking at an outlier company that has scaled really far, really fast and is making really a ton of revenue and its valuation is far above and beyond its peers.
And that’s really how I would look at defining a unicorn company. What it takes to become a unicorn is. I don’t necessarily believe in luck, but maybe it’s a mixture of opportunity and timing and preparedness, but it’s also scalability. It doesn’t necessarily mean that you have to be the fastest to market in any one thing that you do, but you have to be able to grow into a very large and growing market.
And what’s interesting is that what most people don’t realize that I believe it’s 60 or 70% of unicorns are consumer facing products or services.
Give us an example or two.
Meta, Uber, Instagram, WhatsApp, right? All of these, while they have kind of enterprise solutions, they’re all consumer facing applications that ended up becoming unicorns in their own timelines and respect and some of the largest companies that we have today. It’s also one of the most difficult types of businesses to get to a unicorn status because you’re relying on such a vast distribution of your product. It’s not, I couldn’t go to one. And that one goes to many, like a typical B2B or enterprise sales. But when you’re talking about a consumer company, again, product or services, you’re talking about mass distribution across retail consumers like you and I.
So that’s typically why you have these unicorns in consumer companies specifically.
So, we hear just, reading and so forth in the news that there are many ways to go public today, traditional IPO, SPAC, direct listing, how do founders decide which path is right for their company?
I think it’s a group decision in terms of how to. How to achieve the liquidity event that they’re looking for, because ultimately that is by and large for the most part. The reason for going public, whether it’s a SPAC and a SPAC, is essentially a vehicle of capital that is raised without a specific target in mind.
Then once that capital is committed, then the vehicle will go out to try to acquire companies and essentially bring them into its entity, which is already publicly listed. The purpose for the acquisition of the company from the company’s perspective is a liquidity event, a reverse merger or direct listing or going IPO.
All of these are different methodologies to essentially effectuate a liquidity event both for the company and the founders as well as all the investors around it. Now, how do they actually choose to go public or rather, how do they choose to gain this liquidity event is oftentimes a combination between timing in the market and really a conversation with the investors that that are on the board or that are on the Cap table. If there was a specific SPAC that was listed with a target focus in mind that your company just happens to fit well into, then perhaps that is a better idea of gaining this liquidity event for your investors, for your shareholders, for yourself, rather than taking a company and listing it on IPO.
Now alternatively, listing that company and going into an IPO usually means that the management of that company will stay in place. So, whether it’s the CEO, CFO or C-suite, even the employees there, the company is not being bought out, but rather it’s going public. It’s putting its shares up onto a marketplace.
People are trading those shares, maybe employees and founders are selling shares. There are people on the retail market now being able to buy into those shares. The investors are being able to sell those shares as well. But effectively, going through an IPO typically means that you’re going to keep management in place.
Whereas a M&A or a buyout or a purchase of buy a SPAC will typically mean that maybe management stays in place. More oftentimes there’s some sort of transition plan in place where management can start moving out and new management will come in, if not being acquired by a company that is in a similar space.
From your experience what are some of the biggest misconceptions about IPOs or the startup success story?
Someone once told me that they were very successful and they did end up taking their company public, and he was joking with me. He said, Jeff, it’s a 10-year overnight success. And what he meant by saying that was that there’s very few, if any companies, and I know the media portrays either the home run stories or the absolute dumpster fire stories, what they don’t really talk about is everyone in between.
Right.
Which is time, effort, consistency, probably a rollercoaster of revenue and emotions at the same time from the founding team to ultimately bring them to a point of success and going public or selling their business or gaining that liquidity event. So, within those means it’s incredibly difficult to build a business.
It’s both. It’s difficult to build a business to that level. I would say that it’s never been a better time than now probably to start and build some sort of business, whether it’s a service or a product, because of globalization, because of Vibe Coding, things like Lovable, for example and I can use myself an example, having built several platforms on Lovable and that we use internally now.
But it’s never been an, it’s never been easier to start that type of business, even for a non-technical person to build a technical product. But at the same time, there’s an. Incredible amount of consistency that needs to occur for that person to build that business slowly over time. Make sure that foundationally it has good standings and a good course to actually grow revenue.
And ultimately that’s what it’s about. When you are taking a company public, what you are doing is effectively offering shares a piece of your company to retail investors. Even when you’re raising, when you’re raising. Without going public and just raising a seed or series A or series K, I think there was a company that just raised a series K Databricks a billion dollars, at a hundred-billion-dollar valuation.
If you’re thinking about, first of all, I didn’t even realize it goes to series K, and I’ve been doing this for quite some time. And secondly, when you think about, the equities that’s being exchanged, a billion dollars into a hundred billion valuation, plus or minus is about 1%. So, you have to imagine that business has so much more room to grow for that investor to not only make their principle, their initial investment back, but also make money on that money.
Got it.
So, it is it’s incredibly difficult. But what does it mean to go IPO? You have a rinse and repeat business. And you just need additional liquidity. You’re now able to access securitized markets, you’re able to access securitized debt markets as well. So, your cost of capital becomes much cheaper when you’re a publicly traded company.
Right. And that’s the aim right here. You get all that money and then you can invest in R&D or sales, marketing, infrastructure, so on so forth. What is it like behind the scenes to the lead up of an IPO? I’m sure it’s, it can be crazy, right? Just so many things going on and very stressful.
How do founders prepare for the road show pricing and media attention? Do they have like people in the background that are obviously coaching them? I know we always hear on the internet, you have your pitch deck, and you have to practice it and make sure it’s like absolutely perfect. And it seems like there’s probably a pitch deck for the initial angel investors, like the first series, but then the pitch deck gets more and more complex possibly as you go up on the different series.
Anyway, tell us all about it.
Sure. I would say the anxiety probably comes more around media attention than anything else. Everything else, if done the right way, is a structured process. At least that’s how I remember it at Morgan Stanley, that’s how we do it for our clients. Right now, the most important piece and where people find solace, where they find comfort is when they’re in a structured process.
That means that there’s nothing that should be happening on that road show in those conversations that are new to the founding team or to the management team that’s doing it. So, the roadshow itself? Yes. You book it in advance. Yes. You go to a variety of different, whether it’s investment banks or merchant banks, or everyone in between. But effectively what you’re doing is you’re trying to have them take a look at this initial public offering. You would like to have them take allocations of shares going into that initial public offering as well. And that’s ultimately how it starts flowing down into retail portfolios, going on that road show and having the support of larger banks that are doing that.
Now what I would say, even in recent news, what I think wasn’t addressed that should have been addressed is a recent IPO, I believe it was Canva. But don’t quote me on that, that they went to IPO and then all of a sudden, their stock increased by 200, 250%.
Oh wow.
That’s amazing. Great news. Plenty of media attention.
But if I was still working in a bank, I’m sure that I would get kicked under the desk because it was mispriced.
Right.
An IPO should come out. Yes, there’s going to be some volatility around the pricing because there’s people selling, there’s people buying, and that’s the point. But to see a company go public and then immediately increase by 250%, there’s no reason that a company going public, that alone has increased their valuation by 250%.
So, in my mind, that was simply mispriced. I mean if it goes up by 50%, if it goes by 20%, there were teetering on bankers could have done a bit better, but I would imagine that the bankers or the banks that were running that deal are, have lost out on a significant portion of compensation, even for themselves to have priced something so low that ultimately popped up by 250%.
So, I think pricing is really important as well and managing the valuation as you’re going out. Starting from a seed to a series A, B, C, D through K apparently, and then going IPO. It’s incredibly important to manage your valuation because valuation is ultimately what is going to put stress on the management team.
If I raise at a decent, regular, average, even low valuation, the pressure on me is going to be much less because the investors are, their expectation is a 40x return, a 20x return, whatever they’re expecting in terms of a blended on their portfolio investments. But if all of a sudden, I’m taking a valuation that’s much higher than I’m comfortable with, it’s just going to put more stress on me to have a future round at an even higher valuation.
And in order to justify that I have certain metrics that I need to hit. So, raising at a 10 million valuation, means I have to have let’s say 20 million or $30 million in revenue, for example. Top line revenue depends on what your margins are, but for the same round, if I’m raising at a hundred million dollars valuation, now all of a sudden put another zero behind all the revenue numbers that I need to track.
And that can only increase over time because you don’t want to take a down route, meaning you don’t want to take a valuation less today than what valuation you raised at yesterday.
And then we got earnings. The whole cycle of earnings, right?
Exactly
You’re on that merry-go-round of okay, we got to get that earnings number and so forth. Yes. And so, it sounds like it’s just part of the initial celebration and then you got to keep going. Right on and on. Do you think the IPO Pops still matters in 2025, or are investors and founders more focused on long-term stability now, or a little bit of both?
I don’t it’s and/or question. It’s not IPO versus long-term stability and growth. I think it’s a combination or maybe they’re just two separate questions. In terms of long-term stability and growth, that should always be a focus. Companies that pop up way too fast and too high in terms of revenue, oftentimes we’ll see that revenue start to come back down for a variety of reasons, their infrastructure couldn’t handle it. It was short-term revenue that they were trying to focus and book it as long-term. So, I think having a stable set of revenue that you can grow consistently over time, at least in my opinion, is always going to be much stronger and much more valued to an investor than, Hey, I can make a hundred million dollars, but next year we’ll be down to 50 and then maybe 200 million and then again down to 50. It’s just that volatility is not conducive to a good investment or I guess a good long-term investment.
Consistency is key, right?
Consistency is absolutely key. So, I think that’s really important. And I think the IPO, pop or however you want to categorize it, is incredibly important right now.
You have so much cash right now on the sidelines that is also coupled with kind of this illiquidity of so many investors and LPs inside of funds and inside of companies that have not yet gone public. And I think we were slated for a number of IPOs to happen at the beginning of the year between tariffs, other geopolitical events.
A lot of those companies, put a hold on their IPO schedule. But I am anticipating, first of all, we had a number of IPOs this year already happen, despite kind of the typical window being closed early on. And I anticipate that next year, we’re going to see a lot more IPOs. We’re going to see a lot more companies being listed, being acquired, whether it’s through a SPAC or reverse listing, or a public offering, or an M&A transaction.
And the reason for that is just you have LPs, investors sitting inside of private equity, venture capital funds now coming up on year 6, 7, 8, 9, 10. And on paper they’ve made a ton of money, but that doesn’t really help them in any way because they need that money now back in their pockets so they can start redeploying that capital.
I’ve always seen investment dollars deployment of investment dollars into companies across all stages. Very much tied to the IPO and M&A market. Because all of this cash as it turns into cash, meaning from illiquid cash to actual cash in a bank account, investors are not trying to sit on that money.
An investor by definition needs to be investing, and I say the same thing to my team. When we’re reaching out to investors, we’re reaching out to them with an opportunity. We’re not selling a] software that they don’t need or an insurance policy that they’re already covered on. What we’re telling them is, “Hey, Mr. and Mrs. Investor, you are an investor. The only way you make money is by investing, by deploying capital, not by sitting on your hands on that capital”.
So, them putting money out into the market is how they make money, but the only way that they can make money is if they have money to put out to the market.
So, it’s this cyclical process that occurs that we’ve had almost a pause on that process for a little bit too long, and a lot of investors are now looking for liquidity events, and funds now that are that are in secondary funds. Which is when a fund will go to a company and buy the employee shares or buy the founder shares directly instead of investing in the business.
And you also have a lot of continuation vehicles that are popping up. I was recently at a Kirkland Ellis event where it was the new funds group. And I would say 85% of the conversations were around CVS continuation vehicles. And a continuation vehicle is when a fund manager is at the end of the life of the fund.
So, it’s a 10-year fund, it’s year 10, there hasn’t been any liquidity events or minimal liquidity events in the holdings of that fund. So, they end up raising a new fund and transferring assets into that new fund with an extended period of time, continuation vehicle.
So, we touched on a lot, and I think this is a good stopping point. And we’d love to have you back to Interactive Brokers, listeners and everybody. We need to delve into this more and more. It’s like an onion, right?
Peeling it away, understanding it, getting all the terms that come out in the news, and then really trying to understand. We haven’t even looked like how individual investors can possibly invest as an angel investor. Is that even possible? So, do you have anything else, Jeffrey, you’d like to say as we wrap up?
On the business side, I think what’s incredibly important is consistency. And I’ve been saying this for a while, I’ve heard other, both investors, athletes. I just saw, somebody sent me a quote by Tom Brady who is saying the same thing in terms of being consistent.
And if you’re building a business or if you’re an investor, trying to build a business as an investor, meaning that’s your primary form of income, stay consistent. Create a set of rules for yourself. Collect data. Never try to change anything a week or two weeks or 30 days into it. Let it run for 60 or 90 days, whether it’s a strategy, a trading strategy, or whether it’s a business strategy in terms of development or marketing or anything else.
I think that consistency is incredibly important. With the caveat of let it run for 90 days. So, you collect data, like scientific methodology, right? You have a hypothesis; you have a control variable, you run the experiment, you have the conclusion. At the end of 90 days, you gather that data and you analyze what was the result of your experiment.
Then you do it all over again, and you keep doing that over and over again. And the most successful founders, the most successful investors that I’ve ever met, have a similar type of methodology of consistency, of analyzing data, not changing anything too quickly, and then taking that data, learning from it, and doing it all over again.
It’s so much discipline. You got to have passion. You have to have endurance and discipline, and you really got to believe in your product or whatever you’re creating. Okay, good. Jeffrey Fidelman of Fidelman and Company. Thank you so much for joining us today. We’re going to have many more conversations and just want to thank you for that. And listeners, don’t forget to like us, give us reviews and find more at Interactivebrokers.com/campus podcast. Thank you so much.
Thank you, Mary. Thank you for having me.
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