VCs are expected to attain liquidity in 2024 primarily through the secondary market rather than IPOs

If you had asked a group of venture capitalists at the close of 2023 whether the IPO market would finally reopen in 2024, the majority would have answered affirmatively. TechCrunch conducted a survey of over 40 VCs in December, and the consensus was optimistic.

However, with two weeks left in the first quarter of 2024, there have been no major IPOs completed, and few are in progress. Reddit stands out as the only significant IPO in advanced stages, with pricing underway. Beyond Reddit, there is speculation about potential IPO candidates, but little concrete information, such as Shein, reportedly filing a confidential S-1 last fall, and Turo, which filed its initial S-1 in 2022 but remains on the sidelines.

Even if Reddit’s offering proves successful, it may not signal the opening of the floodgates for IPOs, according to feedback from secondary investors. Furthermore, some of the high-profile companies expected to go public this year, such as Databricks, Stripe, and Plaid, have either stated they won’t IPO in 2024 or have engaged in funding events suggesting a delayed IPO timeline.

Market conditions remain less than ideal for IPOs in 2024, with high interest rates diverting investors from equity to bonds and valuations still below their 2021 peaks. As a result, later-stage venture investors may stand to gain little or even lose money if their startups were to go public at present.

However, if IPOs fail to materialize, there is still optimism for liquidity through secondary marketplaces. These platforms allow private companies to authorize limited stock sales to approved investors, providing an alternative to public offerings. Transactions in the secondary market have been on the rise, totaling $138 billion in 2023, up from $35 billion in 2017, according to data from Industry Ventures.