Final answer:
The going public stage often shocks and alarms initiators due to the transition from a startup to a publicly scrutinized company, which brings new pressures like compliance and diluted control. The IPO is an essential step for capital and growth, yet exposes the company to market risk and potential disappointment.
Step-by-step explanation:
According to Vaughan, the going public stage often shocks and alarms initiators because it represents a significant shift from the familiarity of a closely held startup to the scrutiny and demands of the public market. Stringent regulations, expectations for transparency, and the necessity for consistent financial performance are all new pressures that founders and early investors must face. Initiators are also likely concerned about the dilution of control, as making decisions that impact the company's future is no longer confined to a small group of original investors but now involves a larger pool of public shareholders.
Despite the potential shock, initial public offerings (IPOs) are a critical milestone for many companies, providing necessary capital to expand operations and repay early-stage investors. Angel investors and venture capitalists, having supported the firm in its nascent stages, now have the opportunity to realize returns on their investments. However, with the company's performance and prospects exposed to the broader market, the risk of disappointments and the unveiling of over-optimism or poor management can alarm those who were closely involved from the beginning.