I received a few emails on how to 'get into' the pre-ipo deals and i am actually evaluating one pre-IPO deal right now and is doing a book-building exercise for this deal. Since i am on this topic of pre-ipo deal, i will first explain what a pre-ipo deal is and why companies do a pre-ipo round instead of going directly to IPO.
Pre-IPO investments are usually the 'fund raising' round just before the Company goes for an IPO. The IPO will usually occur 6 to 18 months after the Company receives the pre-IPO financing. You may wonder why Companies bother to do a "pre-IPO" round and not a "IPO" immediately. Well, the key reasons are as follow:
The Company usually needs cash urgently for expansion and for working capital, however, it is too time consuming to raise funds from an IPO and the Company can raise money quickly via a Pre-IPO round to help ease the cash flow.
In addition, by raising a pre-IPO round, the Company is raising the minimal amount that it needs to ramp up its sales and profitability. If it manages to ramp up its sales and profits by using the pre-ipo funds, it will be able to command a better valuation at the time of the IPO and that will be even better for the Company and its owners.
In some situations where the IPO market is 'dead' (like what Singapore IPO market is in right now), it is difficult to raise funds from the public due to weak sentiments. The Company may opt to do a pre-ipo round now to meet its needs and then try to go for a listing again when the sentiments turn better and when IPO valuation are higher (i.e. they can list at a higher valuation).
There are many technical terms in a pre-IPO deals which i will not elaborate further. I will discuss more on 'how to get into a pre-ipo deal' on another day.