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🔄 The 2024 Pre-IPO Market Recap

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Hi everyone,

A belated Happy New Year to you all! It’s good to be back for the first newsletter of 2025.

January is always a fun time for the team and I. Deals slow down a bit after the year-end rush, so we finally have time to catch our breath. I’m taking my 10-week-old on his first road trip down to Monterey and Carmel for a couple of nights. I’m excited, but also terrified, so feel free to send over your tips.

The deal slowdown also allows us to reflect on the past year. In this newsletter, I wanted to do one final recap of 2024 before we officially turn the page ahead. My colleague John wrote about the public market performance in 2024 in the last newsletter, so we’ll focus this one on the private markets.

One of the challenges with the private markets is that the data is not readily available. Lucky for us, our friends and partners at Caplight have aggregated the private market data and put together a 2024 Pre-IPO Market Year-in-Review deck to give us a view into the private markets. Let’s jump in.

📊 How did the private markets hold up?

The top private companies trended upward in 2024, especially after the election.

Private Outperformed Public in 2024

That is a welcome sign given that the IPO window has largely been closed for the past 2 years. One caveat is that the Caplight Top 20 Index is composed of the largest late-stage VC-backed companies with active secondary markets, so it is fairly concentrated and not reflective of all late-stage VC-backed companies.

One major driver of the post-election spike was SpaceX’s tender offer at a $350B valuation, nearly double the previous valuation. It seems that investors in SpaceX are excited about Elon being involved with the White House.

💵 What does this mean for my equity?

Private markets doing well as a whole are generally good for the value of your shares. But to potentially realize that value, you need liquidity, so let’s take a look at how the secondary markets did in 2024.

26% Increase in Trading Volume Year-over-Year

As a whole, secondary trade volume increased 26% to $1.55B in closed trade volume in 2024. In terms of number of trades, 2024 had the most closed transactions since 2021. That’s the good news.

Unfortunately, both volume and trade count peaked in Q2 for the year and continued to trend down for the rest of the year. Anecdotally, I was not surprised to see this. Our clients were most active in the secondary markets in Q2. The summer then slowed significantly and volume never really picked back up.

In my opinion, I think a lot of investors got excited about the IPO window opening up in 2024 after Reddit’s successful IPO in March. But then began to pull back once they realized that many private companies weren’t in a rush to test the public markets themselves.

🤔 Higher prices, but declining secondary activity. What gives?

In short, a few companies drove the secondary market performance this past year. The headline numbers look decent, but it’s concentrated in just a few big names, so it’s not a broad-based rally across the ecosystem. There is a lot of optimism heading into 2025, but we are not yet in the clear. The secondary markets are still very difficult for the majority of companies out there.

I believe the reason secondary market investors focused on the largest companies is because they view those companies as the safest bet and provide the highest chance to get liquid sooner rather than later. As exits have stalled, investment funds have not been able to return much cash to their investors who are getting antsy to realize their returns.

Outside of the AI-related darlings, we’ll likely need to see some solid IPO activity for liquidity to come back into the market. The good news is that there’s a lot of optimism for the 2025 IPO window to open. Let’s hope for a great year!

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