Jul. 04th, 2023
Postponing the inevitable: Is an IPO frenzy on the horizon for 2024?
The global Tech industry remains in a state of recuperation, and as always, we turn to the United States for insights into what lies ahead for Europe.
To begin, US inflation saw a modest increase of only 4% in May, marking the slowest annual pace since March 2021, according to data from the Bureau of Labor Statistics. Moreover, for the first time since early 2022, the Federal Reserve opted to maintain steady interest rates at its recent June meeting.Furthermore, the BVP Nasdaq Emerging Cloud Index, which monitors public tech valuations in the US, witnessed a 26% surge from January through the end of June.
However, when we examine the Tech industry on a global scale, particularly in terms of exit value, 2023 is likely to be remembered as one of the worst years in recent memory due to the dearth of significant IPOs.
But does this spell disaster for the venture capital (VC) ecosystem?
In the short term, VC returns are poised to be lackluster, if not non-existent, in 2022 and 2023. This will inevitably affect their capacity to secure new funds and invest in emerging companies.
Looking further ahead, the survivors who skilfully navigate this crisis will emerge stronger than ever, boasting enhanced financials and having consolidated their competitors and ecosystems. Many of these survivors have deliberately abstained from exiting under current market conditions, instead choosing to wait for favourable tailwinds. They seek a time when trading and transaction comps. align more sensibly with their most recent valuation rounds and expectations.
This sizable backlog of IPOs, originally slated for 2022 and 2023 but delayed due to declining valuations, is expected to materialize in 2024 as soon as valuation levels attain more reasonable multiples. It is easily foreseeable that VC-backed startups will seize this window of opportunity with great urgency, driven by the fear that it may swiftly close should another crisis befall the Tech industry.
Arthur Porré, Founding Partner, July 4th, 2023