An initial public offering, or IPO, is the first time a company offers its shares to the general public. The SEC describes going public as typically meaning a company undertakes an IPO "by selling shares of stock to the public, usually to raise additional capital." After it, the company's stock trades on an exchange and anyone can buy or sell it.

For a founder, an IPO is one of the few ways to turn a private company into a public one. It can raise money, give early investors and employees a way to sell shares, and put a market price on the business. It also changes how the company is run, who it answers to, and how much it has to disclose.

This article covers what an IPO is, the steps in a typical US process, the main alternatives (direct listing and SPAC), what being public costs, and how to tell whether a company is ready. It's reference material, not legal or investment advice. The examples here follow US rules because those are the ones with primary sources we could verify. Rules for listing in Southeast Asia and elsewhere differ by jurisdiction and exchange, so talk to local counsel and a sponsor or underwriter early.

What an IPO Is, and What It Isn't

Under US federal securities law, a company can't lawfully offer or sell shares unless the offering is registered with the SEC or an exemption applies. The SEC's investor bulletin on IPOs explains that a company registers an offering by filing a registration statement, typically on Form S-1. Everything before that point (seed rounds, a Series A, a late-stage private round) usually happens under exemptions, not a public registration.

Two things are easy to confuse with an IPO:

A funding round. A priced private round sells shares to a small group of investors. An IPO sells to the public through a regulated process with public disclosure. See what a lead investor does for the private side.
An exit in the sense of a sale. An IPO isn't a sale of the company. Founders and early investors typically keep their shares, though they usually can't sell them right away. We come back to that under lock-ups.

An IPO also isn't the same as the stock "going up." The SEC bulletin notes that an offering price reflects a negotiated estimate of value and may bear little relationship to where the shares trade shortly after.

The IPO Process, Step by Step

Timelines vary widely, and no source we fetched gives a standard duration, so treat the order below as a map rather than a schedule.

1. Choose underwriters and advisers

Underwriters are the investment banks that manage and sell the IPO. The company also needs securities lawyers and an independent auditor. In a traditional IPO, the SEC's overview of pathways to going public says the company sells newly issued shares to the underwriters, which then sell them primarily to institutional investors.

2. Prepare financials and do due diligence

The registration statement needs audited financial statements. The SEC bulletin states that companies conducting IPOs generally include three years of audited financial statements, while emerging growth companies and smaller reporting companies include two. Lawyers and bankers also review the company's contracts, ownership records, and risks. A clean cap table and documented option grants (see employee option pool) save time here.

3. File the registration statement (Form S-1)

Most of Form S-1 is the prospectus. The SEC bulletin lists the sections it typically contains: summary, risk factors, use of proceeds, dividend policy, dilution, management's discussion and analysis, business description, management, and financial statements. The SEC also notes that initial filings can be made on a confidential basis in many cases, and that registration statements go through EDGAR, the SEC's filing system.

4. SEC staff review

SEC staff review IPO registration statements for compliance with disclosure requirements. Per the SEC bulletin, the review often leads to revisions to the prospectus. It is not a guarantee that the disclosure is complete or accurate, and the staff doesn't judge whether an IPO is a good investment. Responsibility for accurate disclosure stays with the company and the others who prepared the filing. The SEC's going-public page adds that the company can't sell the securities until the staff declares the registration statement "effective."

5. Marketing and price discovery

The SEC bulletin explains that underwriters typically collect "indications of interest" from prospective investors before effectiveness and use them to recommend a price. The company ultimately sets the price. The "order book," the list of how many shares each investor wants at what price, is one input, alongside valuation analyses. Founders often call the marketing tour a roadshow. Pricing involves competing interests: a higher price raises more money for the company, while underwriters also want a price attractive enough to sell every share. The bulletin notes that underpricing creates a discount for initial investors, but it can leave money on the table for the company if the stock jumps on day one.

6. Pricing, listing and first trade

Once the registration statement is effective, the company files a final prospectus with the final price. In conjunction with the IPO, a company usually applies to list on an exchange such as the New York Stock Exchange or Nasdaq, per the SEC bulletin. Trading starts, and the company receives the proceeds from the shares it sold.

7. Lock-up expiry

Existing shareholders who aren't selling in the IPO often sign a lock-up agreement. The SEC bulletin describes it as an agreement not to sell shares for a certain period, "typically 180 days." The exact length is a contract term set in the underwriting deal, so it can differ. The SEC also warns that when lock-ups expire, the share price may fall if a large number of shares become available at once. For founders, lock-up dates are the moment to plan liquidity, taxes and any equity dilution from future share issuance.

Key Facts: IPO

An IPO is a company's first registered sale of shares to the public, usually to raise capital (SEC).

In the US, an offering must be registered with the SEC (typically Form S-1) or fit an exemption. Shares can't be sold until the SEC staff declares the registration "effective."

SEC review is a disclosure check. It doesn't approve the merits of the offering.

Underwriters collect investor interest and recommend a price. The company sets the final price.

Lock-ups on existing shares are typically 180 days according to the SEC, but the length is contractual.

After the IPO, the company must file annual (10-K), quarterly (10-Q) and current (8-K) reports.

Alternatives include direct listings and SPAC mergers, each with different costs and trade-offs.

Alternatives to a Traditional IPO

The SEC's Office of the Advocate for Small Business Capital Formation compares three pathways. The comparison below summarizes that document.

Pathway	How it works	Why companies choose it	What to consider
Traditional IPO	Company sells new shares to underwriters, who resell mainly to institutions	More control over the initial investor base, plus underwriter help marketing and managing early trading	High transaction costs including underwriter fees, and a long process
SPAC	A shell company raises money in its own IPO, then merges with a private company (a "de-SPAC")	More certainty about the amount raised, potentially a shorter timeline, a sponsor management team	High overall costs and dilution from sponsors and private financing investors
Direct listing	Existing shareholders sell directly to the public, typically with no new funds raised	Potentially lower transaction costs	No control over the initial investor base, possible trading volume problems, so it suits strong consumer brands

The same document says the SPAC route "tends to draw bigger companies." The practical point for an owner-led B2B company: a direct listing doesn't raise growth capital the way an IPO does, and a SPAC changes your cap table in ways the sponsors' economics drive. Neither is a shortcut around public-company obligations.

What Being Public Costs

The SEC's page on whether to go public is balanced. Reasons companies go public include raising capital, increasing liquidity for owners and employees, acquiring other businesses with stock, attracting and compensating employees with stock and options, and building brand awareness.

The costs it lists:

The offering takes time and money.
Management spends significant time on SEC reports and communication with stakeholders, which adds cost.
The company and its officers may be liable if the new legal obligations aren't met.
You may lose some flexibility, particularly when public shareholders must approve actions.
Financial statements and disclosures about material contracts, customers and suppliers become available to the public, including competitors.

On reporting, the SEC's reporting requirements page says public companies file a Form 10-K annually and a Form 10-Q quarterly, with the CEO and CFO certifying the financial information. They also file Form 8-K to disclose significant events, typically within four business days. These include entering or ending material agreements, acquisitions or disposals of assets, changes in control, and director or officer changes.

That's a different operating rhythm. A private company can negotiate a down round or a bridge round quietly. A public one discloses material events within days.

Control and Investor Rights

An IPO changes the rights that private investors negotiated, such as a liquidation preference, so check how your charter and investor agreements treat a listing. Founders should also review voting control. The SEC bulletin notes that an increasing number of companies create separate classes of common stock with different voting power, which has its own governance trade-offs.

Are You Ready? Readiness Signals

No single metric says a company is ready. The signals below are practical checks drawn from the process above, not a formula.

Audit-grade financials. You need audited statements for two or three years, depending on company status, per the SEC bulletin.
A reporting process. Can you close the books and produce accurate quarterly numbers on a fixed schedule, with executives willing to certify them?
Predictable performance. Public investors price on revenue, customers and results. Metrics such as ARR and MRR and unit economics need to hold up under scrutiny.
Clean ownership records. Cap table, option grants and investor rights should be documented and consistent.
Governance. Board structure, committees and policies that a public shareholder base will expect.
A reason to be public. Capital, liquidity, acquisitions with stock or employee compensation, the reasons the SEC lists. If the main reason is prestige, the costs above rarely justify it.

For a structured view of operating readiness, see the IPO-ready growth model. An IPO isn't the only exit; the acqui-hire is one non-IPO example.

Common Misconceptions

"The SEC approves the IPO." It reviews disclosure and declares the registration effective. It doesn't evaluate merit.
"Founders can sell on day one." Restricted securities and lock-ups usually prevent it.
"An IPO price equals value." It's a negotiated estimate, per the SEC.
"Going public ends fundraising stress." It replaces it with quarterly reporting and public scrutiny.

Frequently Asked Questions about IPOs

What does IPO stand for?

Initial public offering. It's the first time a company offers its shares to the general public, usually to raise capital, and typically involves registering the offering with the securities regulator.

What is Form S-1?

In the US, it's the registration statement most companies use for an IPO. Most of it is the prospectus, which describes the business, risks, use of proceeds, management and financial statements.

Does the SEC approve an IPO?

No. SEC staff review the disclosure and the registration becomes effective after comments are addressed. The SEC says effectiveness isn't an approval of the offering's merits or a guarantee that disclosures are accurate.

What is a lock-up agreement?

It's an agreement by existing shareholders not to sell for a set period after the IPO. The SEC says the period is typically 180 days, but it's a contract term and can differ.

How is a direct listing different from an IPO?

In a direct listing, existing shareholders sell directly to the public, typically without raising new funds and without underwriters. An IPO sells newly issued shares through underwriters.

What is a SPAC?

A special purpose acquisition company is a shell that goes public through its own IPO, then usually merges with a private operating company within about two years. The merged company becomes public.

What reports does a public company have to file?

In the US, a Form 10-K annually, Form 10-Q quarterly and Form 8-K for significant events, generally within four business days, plus proxy and shareholder meeting requirements.

Can a company outside the US list in the US?

Rules for cross-border listings depend on the company's home jurisdiction and the exchange. This article doesn't cover them, so ask a securities lawyer who knows both markets.

About the author

Brian Tr

Co-Founder & COO

Brian Tr is Co-Founder and COO of Rework, with 12+ years in B2B go-to-market and operations. Brian scaled Rework from 0 to 10,000+ B2B customers across CRM and productivity tools. Brian writes for founders and owner-CEOs: startup fundamentals, founder-led and family businesses, partnerships, and how SaaS, marketplace, AI and EdTech companies grow.

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