This year has already proven that startups are willing to go public in a less-than-ideal market — and get rewarded for it. But bankers, lawyers and investors said recent IPO successes aren’t enough to propel more than a dozen tech IPOs this year.
“I don’t think we’re going to have the floodgates open like I would have thought,” Greg Martin, co-founder and CEO of Rainmaker Securities, told TechCrunch. “The trickle was delayed. I thought it would be earlier in Q1. Because of that, I think the gates can’t open until 2025, but we could have a healthy flow of 10 to 15 companies for the year.”
Jeremy Glaser, an attorney and co-chair of venture capital and emerging companies at Mintz, said that despite the performance of recent IPOs so far, people need more data than a few weeks or a month of trading to feel confident.
Looking at Klaviyo and Instacart’s performance today shows why people remain cautious. Klaviyo currently trades at a market capitalization of $5.94 billion, down from its IPO price of $9.2 billion. Instacart is doing better, but is still trading below its original IPO price of $9.9 billion. It currently trades at $9.47 billion.
“I’ve been through a lot of IPO cycles, you really need an extended period of time where you see a lot of IPOs staying above the IPO price,” Glaser said. “I don’t know if we’re there yet. We have some positive signs, but we need to see more companies stay above their IPO price for a long time.”
Timing plays an important role here as well, because of the election. If a few companies had come out and made their public debut earlier in the year — and done well — it might have given other companies enough time and confidence to go through a full S-1 process before the election. However, due to the timing of recent IPOs, companies would be limited in time.
Martin added that despite the successes, he’s not sure this is a good market to exit anyway. Interest rates aren’t coming down the way many predicted and hoped this year, and Martin isn’t convinced the economy is completely in the clear after the 2022 bear market — especially with uncertainty about how markets will react after the election in November.
“I still feel like the recession isn’t out of the way yet,” Martin said. “We had, what, 1% growth in Q1? Mainly macroeconomic factors, it seems that the market feels relative stability at the moment, but there [are] many things that could turn it around. I am optimistic [the market] remains stable. I remain optimistic at this point.”
The sentiment from Glaser and Martin seems to be in line with what other people in the market are saying. A leading venture fund recently told TechCrunch that it was advising all of its portfolio companies that could potentially IPO to wait until next year. Colin Stewart, global head of technology equity markets at Morgan Stanley, he recently told CNBC that he thinks 10 to 15 companies could go public this year — right in line with Martin’s prediction — and that 2025 will be better.
Investors weren’t sure what to make of the IPO market heading into 2024. Some thought activity would pick up while others thought it would be another quiet year, according to TechCrunch research. The one thing everyone seemed to agree on was that any pick-up in activity wasn’t likely until the second half of the year.
But then Astera Labs filed to go public in February, and Reddit followed shortly after. Ibotta was next in March, followed by Rubrik just a week later. All four have since floated and appeared on their first day of trading. While the respective stocks have fallen since then, all are currently trading above their IPO prices — all of which were prices above their original target range.
Watching these four stocks go public makes us wonder: Were investors wrong about the timing of the IPO comeback? But based on the sentiment from people like Martin and Glazer, probably not.
This means that VCs probably have to wait another year for the IPO market to become a significant source of liquidity. However, exits are not completely off the table this year. Glaser said he doesn’t work on IPOs, but his M&A practice has been the busiest it’s been in a long time. For investors looking for returns this year, this is good news.
