Investing & Financing: IPO's and Going Public

I have been watching IPO's over the past few months, and I have seen some rather bland companies generate some decent cash.

For example, one company has a total of 17 employees and generated a net income of [color=red]-$900,000[/color] in their first year (they opened in 2003). Given that, they were still able to generate $77M in investment funds via an IPO.

What does this company do? Their name is PokerTek ([url]http://www.pokertek.com[/url]), and they manufacture poker tables. Judging by their website, it's nothing really elaborate or out of this world...

So, I guess my question is - How hard is it to file for an IPO? Let's say I set a goal for my computer company - If I hit $250K profit in a year, we can "go public"... At $250K a year in profit, multiplied by the industry average P/E ratio (20-30 in the comp industry), my company would be worth $50-$75M on the public market. Would this be a good or bad idea? I would definitely have to hire someone to take care of all that (lawyers, etc.) for the prospectus and whatnot.

That much capital would allow us to develop a new device, setup more manufacturing facilities, hit some advertising, and give us leverage on purchasing power from distributors (i.e. lower prices).

Am I missing something - is there more risk doing it "IPO-style", versus "VC-style"? Or are VC's usually used to get off the ground, at which point you then go for the IPO? It just seems alot of companies do an IPO pretty quickly, and raise decent money - even if their business isn't exactly high-tech or top notch.

[quote="jpomerenke"]There is a lot of facotors - main one is it cost a lot of money to file an IPO - you would need a VC just to file one :)[/quote]

Well, the only first fee would be the cost of generating the prospectus, which is done by an attorney's office. I agree that having that done with be pretty expensive (lawyers are expensive). The second "fee" is typically 5% of the expected funds to be raised, which goes to the investment bank.

The article (link below) also says something about doing a "road show" to hype the stock - but there are alot of companies on the NASDAQ filing for IPO's that I've never heard of. I could see that being the case for Google (everyone was talking about the IPO), but not smaller companies like "PokerTek".

I guess I'll read more about it at various other websites and such... Not like I'm going to be applying for one any time soon :lol:

[url]http://www.entrepreneur.com[/url]: http://www.entrepreneur.com/article/0,4621,319287,00.html