Here’s Proof That ‘Hotter’ Startups End Up Paying Less In IPO Fees


In a recent blog post, Tom Tunguz of Redpoint Ventures writes that a company’s reputation and size can directly lead to lower IPO fees as a portion of overall money raised.

Tunguz analyzed the data from 360 venture-backed technology IPOs over the last 10+ years which, having raised at least $107 million, ended up shelling out an average of 8.8% of total IPO dollars for advisory, legal and accounting costs. Crucially, Tunguz found that hot IPOs — companies that are expected to become leaders in the public market– end up spending less on lawyers, banking and overall consulting fees.

Facebook, for instance, paid $182 million in fees on $17 billion of cash raised — a measly 1% of the the total cash, compared to the 8.8% industry average. Facebook’s massive influence on the industry average can be seen in the graph below, as the average fees take a dip in 2012.

Even if you’re not anywhere near leading your own IPO, Tunguz’s results show the advantages of good PR: companies like Twitter, Google, Zynga and Facebook have all commanded lower fees because advisors are eager to work with the startups du jour.