While there is financial and legal due diligence associated with assessing an IPO, there is also the core component of entrepreneurship that determines future durability, credibility and viability which is OPPORTUNITY EVALUATION. Opportunity evaluation looks to see if the company is in *high growth position* and what risks may affect performance.
High growth companies hold ‘opportunity assets’ that sustainably transform new knowledge into new value. An IPO allows entrepreneurs and their early financiers to monetise this value by selling shares in their enterprise’s future profits to shareholders.
Questions to ask yourself to help identify the existence and strength of opportunity assets include:
- Has, or is this company able to ignite a movement?
- Are they creating a new market or are they competing on cost and quality improvements in an established one?
- How long can they sustain double-digit revenue and profit growth?
- Has the leadership team the vision and competence to drive this growth or does the management team fall short on either dimension?
- Do they control the landscape with protected assets or are they dependent on loyalty?
- Is their strategy capable of exponential growth and what type of deals have the Board been executing to secure needed resources?
- What other investors have or are considering investing and what new value do they see in the company?
- Is this a company that has the potential to impact the world?