Home Venture Capital Tech Stock Tear Not Helping IPOs…Juicy Financial Leaks…General Catalyst in the VC...

Tech Stock Tear Not Helping IPOs…Juicy Financial Leaks…General Catalyst in the VC Directory

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(Photo by Bryan Steffy/Variety via Getty Images)

Reddit CEO Steve Huffman
The Big Takeaway This Week

The conventional wisdom at the moment is that the IPO window remains slammed shut for tech startups. There was hope last fall that Arm, Instacart, and Klayvio would open it back up, but since then Instacart and Klayvio’s stock prices have slipped, leaving only Arm trading above its debut and undermining sentiment once again.

With the public markets roaring in recent months, largely on the back of the “magnificent seven” mega-cap tech stocks, and taking yet another leap upwards this week, one might expect IPOs to be ready for a comeback too. 

“How the market is doing in general has the highest correlation of all these different variables with the IPO market,” noted Thomvest Ventures’ Don Butler. “You want to do it in the buoyant markets.” 

But there’s a disconnect this time. Few investors believe a robust IPO market will be back before 2025, even if the tech stock run continues. There are a few reasons why past isn’t prologue this time around, investors say, mostly related to structural shifts in private market funding.

Sapphire Ventures’s Jai Das said there wasn’t a lot of incentive for the more successful tech startups to go public at all, pointing to the costs of being a public company versus the relative simplicity of cashing out to private equity buyers, a popular exit for enterprise software firms especially.

He also pointed to the rise of secondary trading, which together with increasingly popular company tender offers mean that an IPO isn’t necessary for employees or even early investors to cash out.

And as Aileen Lee noted in her latest unicorn report, high interest rates and a lack of interest in big tech M&A–partly a result of intensifying antitrust concerns—mean it’s difficult to justify the private market valuations of many companies, leaving them without an IPO exit path.

Mayfield managing director Navin Chaddha, who has backed 18 tech companies that went on to IPO, is more optimistic than most. In a text exchange, Chaddha said expects the 2024 IPO market to be “better” than last year, partly because of the recent public stock run-up.

Others, like Norwest Venture Partners’ Sean Jacobsohn, were taking more of a “wait-and-see” approach.  

There are whispers of certain tech companies breaking through this year, such as Navan or Rubrik, which pushed back its plans to IPO into 2024 after the less than stellar performances of Klayvio and Instacart. There’s also the report in Reuters that showed Reddit’s plan for an IPO in March, although sources warned that it could be pushed further back. 

But even if public markets cooperate, fresh barriers loom, including the instability associated with the U.S. presidential election in the back half of 2024. “That uncertainty or volatility is the sort of thing that pulls the IPO window shut,” said Butler. 

Another Newsletter to Try

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