As many people herald the new field of tech IPOs as a sign of a revitalized market, Andrew Gordon finds that PR and IR must now take on more cautious and vigilant roles.With everyone agog over Google's highly anticipated IPO, which is expected as early as this spring, it appears that "IPO" is no longer a dirty word in the tech community. And Google isn't the only company whose pending public offering is drawing attention. Salesforce.com and Dolby Laboratories are among many companies planning to go public, and such events have everyone from the investment community to the media heralding the return of the tech IPO as a sign that the technology industry is finally coming out of the doldrums of the past few years. "The tech IPO market is finally heating up," declared a recent headline on CNN/ Money's website. While no one expects - or even wants - a return to the dot-com days that fueled IPO insanity for firms that were more about buzz and hype than about business and finances, there are definite signs of life again. As a recent CNET article points out, 22 tech IPOs hit the market during 2003, 19 of which came during the second half of the year. And a dozen of those 22 IPOs were priced above their initial pricing range, which indicates strong demand for the new issues on Wall Street. A more skeptical environment While the tech IPO landscape is now more promising, PR and IR are playing a much more cautious and guarded role these days. After nearly two years of corporate scandals, the SEC and other government entities are now paying much closer attention. At the same time, the investment community and media are suddenly much quicker to sniff out rotten apples. It's an environment where PR and IR pros find themselves having to play by some different rules. "Generally speaking, it's back to basics in the financial community and their view on new IPOs," explains Tony Perkins, creator and editor-in-chief of Red Herring and AlwaysOn, an online interactive network for those in the tech industry. "Clearly everyone is more cautious, including the media. If you're covered by the tech media, you need to do your homework and substantiate your claims. And the most meaningful claims have to do with revenue. You're not going to see a lot of unprofitable companies going public. There has been a backlog of good companies resting their engines." Everyone from investors to the media want to see a track record of strong financial performance and corporate governance that spans at least a few years, says David Pasquale, a SVP with The Ruth Group who oversees the tech IR practice. And, therefore, PR efforts must reflect that. Many companies used IPOs as branding opportunities during the tech boom. But now that there's a return to substance over style, what resonates these days is the competence of the executive team, a strong board of directors, a profitable business model, and some kind of differentiation from the competition, adds Pasquale. Good PR and IR can help companies articulate that. Pasquale worked with Netgear, a Santa Clara, CA-based networking technology company, on its IPO last July. "We focused on telling a compelling story [as well as] what we are doing today, and proof that we are a good investment," says Doug Hagan, Netgear's senior manager of corporate marketing. "We had to go above and beyond what was once expected. The bar is a bit higher, and it's up to the company to make it clear they can get over the hurdle. PR is an important piece of that. But you still have to be a strong business with a good business model. All the PR in the world can't make up for that." That was also the focus at Tessera, a San Jose, CA-based semiconductor firm that went public in November. "Our core message was very transparent," says Tessera PR consultant Joyce Smaragdis. "We had to make sure we were looking through a glass rather than a mirror." And while in the late 1990s a young and experienced management team could often be passed off as "new economy whiz kids," nowadays preparing management to endure unprecedented scrutiny is critical. "We spent an enormous amount of time prepping the management team," adds Lillian Armstrong, MD of Lippert/Heilshorn & Associates' San Francisco office, which worked on Tessera's IPO. "We worked with them on their presentation and made sure they were telling their story well within the rules of the game." Message preparation But executives aren't the only ones PR and IR teams must worry about. All employees must know what they can and, more importantly, can't say. Marianne O'Connor, president of Sterling Communications, who also worked on Netgear's IPO, says the best thing to do is to involve all employees in the IPO preparation process, at least in some capacity. That's because it is critical for employees to know that only authorized spokespeople are allowed to talk about the deal. This is particularly crucial at a time when the SEC scrutinizes all statements for anything that remotely looks like a firm could be hyping itself, and its IPO. "Sarbanes-Oxley has made cavalier companies more realistic," says O'Connor. But companies, particularly smaller ones, need to be ready to come out with guns blazing after their SEC-imposed quiet period passes. (During the quiet period, a company is limited in the public statements it can make about the offering for the 25 days following the IPO.) IPass, a Redwood Shores, CA-based virtual network software firm that went public in July, was so conservative during its IPO quiet period that the company had to practically reintroduce itself once it could start talking again. "We didn't want to do anything that could be seen as hype," says John Sidine, iPass' director of corporate communications. "We weren't announcing new customer wins. We weren't making any claims on anything from revenue to leadership. We were getting validation from analysts on our leadership position, but we couldn't use it. We didn't speak to the business press for months. So we had to retell our story. We took our CEO to New York on a press tour and met with all the usual suspects in the business press. Because [our IPO was] so popular, we got a lot of big business press; we didn't want to lose that momentum." There's no need to shut down PR efforts completely during an IPO, says Lou Hoffman, president of the Hoffman Agency which worked on iPass' IPO. Companies should simply maintain the normal level of communications, focusing on customers, products, and technology. What is crucial is making sure there's a consistent pattern of PR behavior and that everyone "is singing from the same hymn book," says Hoffman. But the rules are different now, as legal teams are back in the lead position and are writing the conservative rules that everyone has to play by. But thankfully the companies that needed PR to help them get to an IPO as fast as possible have been replaced with businesses that are more interested in being a great company that makes great products, says Hoffman. Looking at the recent rise in the Nasdaq, Perkins points out that there still aren't dozens and dozens of tech IPOs, which he says underscores the conservative nature of the investment industry right now. For the past couple of years, tech companies were trying to avoid the spotlight. Now they're starting to poke their heads out of the ground, he says. And he points to the venture capital community as the ones most eager to light fires under tech IPOs. "VCs are the most anxious for these companies to go public," says Perkins. "They want to have some scores on their scorecards. If anyone is pushing Google, it's the VCs."