Investors are not only directing their funds towards public markets and IPOs, but they’re also showing keen interest in acquiring shares of private companies at an accelerated pace, marking the highest level of demand seen in years.
According to a report from Forge Global, a secondary marketplace for private shares, there’s a shift where more investors are seeking to invest in privately held companies than there are sellers offering shares for sale, marking the first occurrence since November 2021.
The report, which covers data up to February, suggests that the enthusiasm surrounding IPOs like Astera Labs and Reddit, along with the anticipated IPO of Rubrik, has spilled over into the private market. Andrew Saeta, managing director at Forge, noted that while similar excitement was observed last year with IPOs such as Klaviyo and Instacart, this year’s sentiment is notably different.
Saeta commented, “It had been a while since significant tech companies considered going public. The enthusiasm cooled off a bit last year when those IPOs didn’t meet the high expectations.”Investors are not only directing their funds towards public markets and IPOs, but they’re also showing keen interest in acquiring shares of private companies at an accelerated pace, marking the highest level of demand seen in years.
According to a report from Forge Global, a secondary marketplace for private shares, there’s a shift where more investors are seeking to invest in privately held companies than there are sellers offering shares for sale, marking the first occurrence since November 2021.
The report, which covers data up to February, suggests that the enthusiasm surrounding IPOs like Astera Labs and Reddit, along with the anticipated IPO of Rubrik, has spilled over into the private market. Andrew Saeta, managing director at Forge, noted that while similar excitement was observed last year with IPOs such as Klaviyo and Instacart, this year’s sentiment is notably different.
Saeta commented, “It had been a while since significant tech companies considered going public. The enthusiasm cooled off a bit last year when those IPOs didn’t meet the high expectations.”
Public vs Private
The private market encompasses companies that are privately owned and thus not registered with the Securities and Exchange Commission. A fundamental difference between private and public companies lies in the fact that private firms are not obligated to meet SEC requirements regarding the disclosure of company information. This distinction contributes to the limitation of investments to funds such as venture capital or private equity, or individuals earning at least $200,000 annually.
The Forge Private Market Index, as described on the firm’s website, “reflects the current performance and pricing activity of venture-backed, late-stage companies that are actively traded.” In 2024, it has seen a 4% increase, which may not seem significant until considering that it had plummeted by over 20% in 2023, following a more than doubling in 2022.
Recent gains can be attributed at least in part to the growing interest in artificial intelligence, according to Saeta. Data from the Organization for Economic Cooperation and Development indicates that VC funding for the AI sector surged from $3 billion in 2012 to approximately $75 billion by 2020.
“AI offers a multitude of applications,” he added. “One can argue that various companies are AI-adjacent, prompting many to incorporate a significant AI component, whether by adding ‘AI’ to their website address or by engaging in more substantial endeavors.”
February witnessed a stability in sellers’ indications of interest (IOI) and an uptick in buyers’ IOI, with sector-specific variations. While specific figures were not provided, the report highlighted that a significant portion of venture capital flowed into AI-related ventures.
“The private market historically exhibits slower movements compared to public equity markets, both on the upside and downside,” noted the report authored by Craig Derbenwick, senior director of content strategy at Forge. “Thus, the strength observed in public markets has the potential to translate into improved prospects for private companies, albeit after a lag period.”
