A Look at the IPO Market As Investors Hope for Strong Instacart, Arm & Klaviyo Offerings
Here are 11 charts & tables that show the state of IPOs and M&A
IPOs are key stepping stones to exits for venture capitalists. And initial public offerings are a major source of fresh funding for late-stage technology companies.
Both exits and new funding are desperately needed in a world where much of growth stage financing is frozen.
VCs want to show skeptical limited partners actual cash returns as markdowns proliferate. High-growth companies want fresh outside capital to maintain momentum even as funding sources have dried up.
A rebounding IPO market would help restore some confidence to the damaged psyche of the startup ecosystem. So investors are wondering whether the IPO market might pick up.
A lot will hang on how the stock market receives Instacart, the food delivery company that has relied on a surge in advertising revenue to boost its performance, Klaviyo, the under-the-radar marketing automation platform, and Arm, the SoftBank-owned semiconductor and software design company.
Given the acute interest among venture capitalists and startup founders for a read on the IPO market, I had our data whiz Wenqi Shao whip up some charts and tables on the state of the IPO and M&A market. We’ve pulled together the reported and rumored IPO pipeline, data on the slowdown in IPOs, a comparison of DoorDash and Instacart’s valuations, a review of declining bank fees, and more.
Exit volumes and values (both M&A and IPO) in 2023 have remained low.
Instacart had reached a peak valuation of $39 billion in March 2021 but is estimated to be now worth around $10 to $15 billion.
Generally, neither Tech SPACs nor IPOs have performed well in 2023.
Quarterly M&A activity globally continues to trend lower, leaving little exit opportunities for VC backed startups.
Over 230 companies previously valued at over $1 billion have not raised any money since 2021 and are still private. As time ticks on, unprofitable unicorns’ cash reserves are thinning.
IPOs plummeted in 2022
While the US IPO market has been fairly lackluster so far this year, there’s a backlog of high-profile tech unicorns that investors would like to see go public. Companies like Rubrik and Navan have made actual moves toward IPOs. Others like Reddit and Discord have long been seen as potential candidates. Meanwhile, Stripe tapped the private markets earlier this year, dispelling any hope that it would go public in 2023. And Databricks is reportedly in the process of raising at $43 billion valuation, putting off hopes that it would go public soon.
If all the IPO chatter turned into reality over the next 16 months, the hypothetical combined valuation totaling $250 billion would be 2x the value-to-date achieved in 2023 and all of 2022.
But if history is any guide, chatter won’t turn into reality. Even companies that file for an IPO can change their mind. Companies fuel speculation that they could go public for years before they really get the courage to do so.