If you are among those companies looking to go public in the near future, now is the time to get your house in order. Photo via Getty Images

Home to a wealth of world-changing innovations and a highly skilled labor pool, Houston has attracted startups and digital tech firms for years. Today, the city stands at the forefront of a promising era with seven Houston startups beginning the year strong with more than $380 million in venture funding, and the city ranked among the top emerging startup ecosystems in North America

Houston-based startups planning their exit strategies have good reason to be optimistic about an initial public offering, or IPO, market that is expected to grow in 2024. After a two-year slump in startup investing, some market watchers are predicting that the IPO window may reopen as the economy improves and inflation and interest rates cool.

But good timing requires good readiness. The window of opportunity for preparation now appears to be a microwindow. As any company that went public at the peak of the dot-com or post-COVID booms can attest, preparation is essential to quickly take action when the time is right. Hitting that microwindow will require that IPO-bound Houston companies be strategic about their IPO readiness planning. A lack of planning can result in an IPO experience that is not well planned, and potentially a missed opportunity altogether.

It’s unclear when the next IPO window will open, or for how long the window will remain open, but it could happen quicker than expected. This unpredictability suggests that Houston startups seeking to go public should start their legal, financial, and regulatory planning now. The important period for many companies planning an IPO begins six to 18 months prior to listing and lasts until the six months post-IPO.

Readying an IPO

We gained several insights from our discussions with CEOs and CFOs who have effectively navigated IPOs recently to provide insights for companies contemplating going public when the next microwindow opens. A company’s comprehensive readiness plan can be key to performing well in the market, whether it is up or down. Summarized below are common key areas that challenged many C-Suite executives in being a public company and, in hindsight, areas they wished they had addressed earlier in the process.

  1. Internal forecasting. Internal forecasting is paramount. In fact, it’s one of the primary takeaways cited in our conversations with the C-suite execs who went through the IPO process. Houston companies on an IPO track should be prepared to provide accurate forecasting and timely fulfillment of projections. Missing projections can result in significant regulatory repercussions.
  1. Key performance indicators and non-GAAP measures. Take reasonable steps towards performing a comprehensive benchmarking study to determine relevant KPIs and non-GAAP measures and metrics to report upon; be ready with the frameworks in place to report upon during quarterly and annual reporting.
  1. Growth story. The ability to communicate the company’s growth story can be essential to an effective IPO. Company leaders should be able to clearly convey topics such as the company’s growth, vision and strategy, its plans for improving performance metrics, the market opportunity, its competitive edge, and how its product or services will meet market demand. Meetings with analysts and other market influencers are also necessary to gain investor support. The executives we talked to said that when they did not invest time in this awareness-building step, they often found themselves rushing to get the word out as the offering date closed in.
  1. Finance infrastructure and human capital. Understand the infrastructure and operating model required to operate as a public company, along with the human capital necessary to sustain operations. Identifying the necessary skillsets and bandwidth within the team supports a smoother IPO process. Collaborating with experienced, independent advisors is also vital. These advisors assist in organizing the process, outlining SEC reporting requirements, updating SEC-compliant financial reporting, preparing Management Discussion and Analysis (MD&A) and pro forma financial information, and offering guidance throughout the pre-IPO preparation.
  1. Governance. IPO-bound companies need to anticipate new corporate governance requirements as a publicly traded entity, particularly in terms of their board of directors. Proper governance and board oversight can be essential to support the quality of financial statements produced by management. Executives told us that recruiting the right board members is often a significant pre-IPO challenge. Identifying these members early is crucial, as the right resources may not be available later.

Closing thoughts

If you are among those companies looking to go public in the near future, now is the time to get your house in order. Companies are often surprised to discover how much preparation it truly takes to operate as a public company. In fact, we typically recommend starting the preparation journey 18 to 24 months before the anticipated public listing date. Simply stated, if you wait until the IPO window opens before gearing up, you likely will be gearing up for the next window.

Deloitte’s complimentary IPO

SelfAssess tool can help you gauge your ability to go public with a tailored assessment. The tool provides you with useful insights and identifies potential areas for improvement based on the feedback you provide.

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Will Braeutigam is the U.S. capital markets transactions leader at Deloitte & Touche LLP. Laura Evans is audit and assurance partner at Deloitte & Touche LLP.

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Houston-based Fervo Energy bumps up IPO target to $1.82 billion

IPO update

Houston-based geothermal power company Fervo Energy is now eyeing an IPO that would raise $1.75 billion to $1.82 billion, up from the previous target of $1.33 billion.

In paperwork filed Monday, May 11 with the U.S. Securities and Exchange Commission, Fervo says it plans to sell 70 million shares of Class A common stock at $25 to $26 per share.

In addition, Fervo expects to grant underwriters 30-day options to buy up to 8.33 million additional shares of Class A common stock. This could raise nearly $200 million.

When it announced the IPO on May 4, Fervo aimed to sell 55.56 million shares at $21 to $24 per share, which would have raised $1.17 billion to $1.33 billion. The initial valuation target was $6.5 billion.

A date for the IPO hasn’t been scheduled. Fervo’s stock will be listed on Nasdaq under the ticker symbol FRVO.

Fervo, founded in 2017, has attracted about $1.5 billion in funding from investors such as Bill Gates-founded Breakthrough Energy Ventures, Google, Mitsubishi Heavy Industries, Devon Energy (which is moving its headquarters to Houston), Tesla co-founder JB Straubel, CalSTRS, Liberty Mutual Investments, AllianceBernstein, JPMorgan, Bank of America and Sumitomo Mitsui Trust Bank.

Fervo’s marquee project is Cape Station in Beaver County, Utah, the world’s largest EGS (enhanced geothermal system) project. The first phase will deliver 100 megawatts of baseload clean power, with the second phase adding another 400 megawatts. The site can accommodate 2 gigawatts of geothermal energy. Fervo holds more than 595,000 leased acres for potential expansion.

Cape Station has secured power purchase agreements for the entire 500-megawatt capacity. Customers include Houston-based Shell Energy North America and Southern California Edison.

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This article originally appeared on our sister site, EnergyCapitalHTX.com.

Texas university's new flight academy opens at Houston Spaceport

cleared for takeoff

The vehicles may not have “student driver” stickers on them, but Texas Southern University has moved a dozen planes into its new training facility at the Houston Spaceport, opening the way for student flyers to use the facility.

TSU previously reached a deal with Houston Airports and the City of Houston in 2023 to house its prospective Flight Academy at Ellington Field. At the time, TSU had a small fleet of nine planes for student use, but a $5.5 million investment from the city greatly expanded the space available.

The Flight Academy includes a 20,000-square-foot hangar that serves as a TSU satellite campus. The school now has a fleet of 12 Cirrus SR20 aircraft that were acquired last year through state and alumni funding. An additional 4,500 square feet is used as classroom and office space. An 8,000-gallon fuel tank will support flight training operations.

TSU first launched its Aviation Science Management program in 1986 and added a professional pilot program in 2016. The school is now part of the United Airlines pipeline program and has also forged relationships with Delta and Southwest.

“I want to commend Texas Southern University and Houston Airports for their leadership and partnership in advancing aviation education right here in our city,” Houston City Councilwoman Dr. Carolyn Evans-Shabazz in a press release.

“It connects our students to high-paying, high-demand careers in aviation and aerospace. This is how we grow a city in the right way—by investing in workforce development, aligning education with industry and making sure our residents are prepared to lead in the industries of tomorrow. Houston is already a global leader in aerospace and projects like this strengthen that position even further, especially here at Ellington, where innovation and opportunity continue to take flight.”

The City of Houston signed an agreement to continue funding the academy for five years.

Amazon launches ultrafast, 30-minute delivery service across Houston

Amazon Now

More than 20 years after it redefined fast shipping, Amazon is preparing to raise the bar on consumer expectations again by offering to fulfill customers' most urgent product needs in Houston and other parts of the world in a half-hour or less for an extra fee.

The company, which revolutionized online shopping in 2005 with two-day deliveries for Prime members, is rapidly opening small order-processing hubs in dozens of U.S. and foreign cities to cater to shoppers who can't or don't want to wait for cough medicine to relieve flu symptoms or tomatoes for tonight's dinner salad.

The ultrafast service, called Amazon Now, first launched in India last June. Amazon says 30-minute deliveries now are also available in urban areas of the United States, Brazil, Mexico, Japan, the United Arab Emirates, the United Kingdom.

The mini-warehouses devoted to Amazon Now are about the size of a CVS drugstore. They stock about 3,500 products for expedited delivery, including beer, diapers, pet food, meat, nonprescription medications, playing cards and cellphone charging cables.

“We know that customers love speed and always have,” Beryl Tomay, Amazon’s head of transportation, told The Associated Press on Monday. “What we see customers doing, when we offer faster speeds, are they purchase more from Amazon. And Amazon becomes more top of mind for that or other types of items as well.”

In the U.S., the company first tested Amazon Now in Seattle, the home of its headquarters, and in Philadelphia. Most residents of the Dallas-Fort Worth area and Atlanta now have access as well. The service is also live in Dallas-Fort Worth, Denver, Minneapolis, Phoenix, Oklahoma City, Orlando, and dozens of other cities, Amazon said, with New York City and others expected by year-end.

The service charges for Amazon Now start at $3.99 for Prime members, who pay an annual fee of $139, and $13.99 for non-members. A $1.99 small basket fee applies to orders under $15, Amazon said.

The company's bet on a need for speed also comes as some consumers are rebelling against rushed deliveries as they weigh the potential impact on the environment and the workers tasked with preparing orders at a rapid rate.

Amazon’s approach
A relentless focus on speed helped Amazon build a logistics and e-commerce empire. After it made two days the new delivery time normal, Amazon moved into one-day and same-day deliveries for its Prime members. This spring, the company began making 90,000 products available in one hour or three hours at an extra cost.

The scaled down and sped up microhubs that are designed to handle 30-minute orders represent another step in Amazon's pursuit.

Only a handful of people prepare orders from aisles of shelves in the 5,000- to 10,000-square-foot facilities, unlike the sprawling fulfillment centers storing millions of items where Amazon employs a mix of human workers and robotics to pick and pack orders.

Amazon tailors the product inventory to each location and uses artificial intelligence and other technology to analyze what customers buy, as well as when and how often. The most popular U.S. purchases so far include soap, toothpaste, mouthwash, toilet plungers, bananas, limes and wireless earbuds, Amazon said.

The competition
Amazon’s attempt to up the instant gratification ante provides direct competition to on-demand food delivery platforms like Instacart, Uber Eats, DoorDash and Grubhub, which don't have the scale of the e-commerce titan, according to independent retail analyst Bruce Winder.

“What Amazon brings is their prowess in supply chain,” Winder said.

These smaller companies said they don't see Amazon as a threat, though, citing the hundreds of thousands of items they are able to deliver to users' doorsteps by partnering with various merchants and restaurants.

“DoorDash has a mission to empower grocers and retailers and augment their existing footprint, not to replace them,” DoorDash spokesperson Ali Musa said in an emailed statement. “We win only when they win, which is how we can offer over half a million grocery and retail items in under an hour across the country.”

Amazon also is in a race with Walmart to become the retailer that reliably gets orders to online shoppers in under an hour.

For an additional $10 on top of standard delivery charges, shoppers can place Walmart Express Delivery orders from among more than 100,000 products that are guaranteed to arrive in an hour. Many customers, however, are receiving the items under 30 minutes, Walmart CEO John Furner told analysts in February.

Domino's cautionary tale
Companies have promised deliveries in 30 minutes or less before, but the landscape also is littered with failed attempts to break the speed barrier.

The COVID-19 pandemic produced a flurry of companies that promised 10- to 15-minute grocery deliveries from microwarehouses in dense neighborhoods, according to Sucharita Kodali, an analyst at market research firm Forrester Research.

But soaring operating costs, low customer loyalty and the drying up of investor money ultimately caused most to fail before the pandemic was over, analysts said.

Domino’s in 1984 pushed a guarantee that customers would receive their pizzas for free if they weren't delivered in under a half-hour. The company amended the “30 minutes or it’s free” policy after two years, providing only a $3 discount for late deliveries.

The promotion helped Domino’s win market share, but it ended up tarnishing the company's reputation. It dropped the guarantee in December 1993 after a string of crashes and lawsuits involving drivers racing to meet the deadline.

Brad Jashinsky, a retail analyst at information technology research and consulting firm Gartner, said he thinks Amazon should take the pizza chain's experience as a cautionary tale.

“You get in trouble when you start overpromising something like that,” he said.

Amazon won't be making any time guarantees and instead plans to keep customers who chose the 30-minute delivery option updated on the progress of their orders, Tomay said.

“There's no rushing either in our building workers or the gig workers,” she said.

Taking it slow
Kodali thinks Amazon will need a lot of people placing orders around the same time from the same or adjacent apartment buildings for the 30-minute service to be cost-effective.

Consumers may appreciate rapid receipt of products like toilet paper and batteries, but retailers and logistics experts said they also see some online shoppers, especially members of Generation Z, choosing no-rush shipping for products they don't need in a hurry.

Amazon for several years has invited customers to skip one- or two-day delivery and to receive their orders on the same day in as few parcels as possible. Consolidating orders into fewer packages by electing to have them delivered at the same time cuts down on boxes, shipping envelopes and fuel use, analysts said.

“The millennials who came to age in an era that was on fast delivery came to expect it de facto, whereas ... Gen Z is more accepting of a slower speed than previous generations before them,” said Darby Meegan, a general manager at Flexport, a supply chain and logistics company that fulfills orders for thousands of online merchants.

Still, Amazon executives have cited positive early results for Amazon Now in India, where they said Prime members tripled their requests for 30-minute deliveries once they started using the service.

Amazon Now also is attracting more repeat American customers, Tomay said.

“It’s in early days and time will tell,” she said. “I think that it will be interesting to see how it evolves.”