Although new high-tech listings slumped again in 2024, there are hopes that the IPO market will recover in 2025.
A year ago, the outlook was anything but bullish. What has changed?
“I think there’s a lot of confidence in the market. The stock market is trading at all-time highs,” said Ran Ben Tulu of the legal advisory firm Fenwick & West. “We’re moving back towards a focus on growth, which is obviously great for technology.”
High-growth technology companies that were aiming to go public in 2022 before the stock price adjustment now have three years to control costs and grow their businesses.
“We are now well removed from the market shock we experienced a few years ago,” Ben Tzur said. “There’s been a ton of uncertainty around valuations, which hasn’t been favorable to either IPOs or M&A. I think people now know what their valuations are. They’re more clear about it. I am.”
Applications with high attention
Nina Achadjian, a partner at Index Ventures who led Index’s investment in ServiceTitan and continues to do so, said: “Based on ServiceTitan’s IPO and several other successes in 2024, we expect an IPO in 2025. We expect the range to expand even further,” he said in an email. He was appointed to the board of directors of a software company that went public on December 12th.
“In 2025, we should see companies start testing public markets across fintech, cyber, AI, SaaS, and other areas,” Achajan said.
Among the biggest startups widely seen as IPO candidates is Sweden-based Klarna. Klarna, a high-profile buy-now-pay-later provider, has secretly filed to go public with the SEC. The company was recently valued at $6.7 billion in a July 2022 funding, down $39 billion from its previous valuation.
Another potential 2025 IPO is AI chip company Cerebra Systems, which filed in September. The previous valuation was just over $4 billion as of November 2021.
“We’ll start to see momentum from the start of the year and it will accelerate further as the year goes on,” Ben Zur predicted, adding that 2024 saw some early momentum before slowing down.
look back
Crunchbase tracks the largest U.S.-based company IPOs with its Billion-DollExits Board. In 2024, nine such venture-backed companies will go public for more than $1 billion (most recently ServiceTitan), compared to 10 in 2023, including four SPACs, and these numbers are in line with historical standards. is significantly below.
The largest listed stocks in 2024 span a wide range of sectors and have largely held steady. Two of the companies are in biotech, and the rest are in a variety of technology sectors, from social media to semiconductors, cybersecurity to autonomous driving.
Astera Labs and Reddit, both of which went public in March, were the year’s hottest new stocks. With the exception of these two companies and Lineage Logistics, as of December 16, 2024, all of the other big tech IPO stocks in 2024 were trading near or slightly below their IPO prices.
unlocked value
Although many companies have postponed their IPOs over the past three years, going public remains the ultimate goal for most companies.
“The unrealized value unlocked by going public is enormous, and we believe that a small number of venture-backed companies that enter the IPO market in 2024 will act as leaders for private companies that may have been waiting to go public. “We’re looking forward to a perfect market environment,” Achajan said.
Ben-Tzur agrees: “For many of our clients, going public is a boost for their business. It just raises the profile of the company. It makes the company more trustworthy.”
Public companies also have an easier time acquiring other companies and raising capital than private companies, he said.
service titan pops
ServiceTitan began trading 42% above its IPO price in its public debut in December. This bodes well for the public markets as we close out 2024.
“There was a pop in there that people weren’t expecting,” said Peter Walker, head of insights at Carta, a startup equity management platform.
ServiceTitan, a software provider for home services businesses, reported second-quarter revenue of $192.99 million, an increase of 23.7% year over year, and its loss narrowed to $35.65 million.
ServiceTitan is not a brand name or an AI company. Ben-Tzur also said that its customers are small and medium-sized businesses rather than large corporations. “This is a good barometer for companies that are not necessarily the largest private companies,” he said.
Achajan said companies with strong fundamentals will do well in less-than-perfect markets. “Even in tough economic cycles, companies with strong unit economics, significant TAM, and accurate knowledge of customer needs will be able to succeed in the public markets,” she said.
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Illustration: Dom Guzman
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