After two challenging years, the private market appears to be accelerating. In March, the Forge Private Market Index experienced its best month since 2021, rising by 5.2%.1 The positive performance was driven in large part by the IPOs of AI infrastructure company Astera Labs and social media platform Reddit, two unicorns that both rose significantly on their first days as public companies in late March.2
At the end of their first trading days, Astera Labs had risen 72% 3 while Reddit had gained 48%,4 even though both companies have since declined from their highest levels.5,6 These IPOs translated to strong gains for each company from their last private market reading: Astera Labs was up 383% and Reddit was up 67%, compared with their Forge Price on December 31, 2023.7 Together, these two companies contributed more than half of the 5.2% performance for the Forge Private Market Index in March.8
Driven by the two IPOs and broader strength by other companies, the Forge Private Market Index outpaced the performance of many public equity ETFs in March. One notable exception was the Renaissance IPO ETF, which had a 5.8% return for March.9
Looking at the full quarter, the Forge Private Market Index lagged comparable ETFs, though several metrics hinted at a more positive environment emerging for pre-IPO companies. For a more in-depth view of the quarter, please see the Forge Investment Outlook, which includes key trends and metrics covering primary and secondary data.
In the first three months of the year, many core private market metrics showed momentum. March saw the highest proportion of buy Indications of Interest (IOIs) on Forge Markets — 61.4% — since August 2021.10 In addition, Forge also saw a 45% increase in the overall number of IOIs submitted to the platform in Q1 2024 compared to Q4 2023.11
That said, not every indicator was positive. Median trade premiums remain sharply negative, with companies trading at an average discount of -51% on Forge Markets compared to their last primary round valuations, similar to previous months.12 In addition, even the best-performing companies that need to raise capital are not experiencing significant valuation increases, and the median company is seeing essentially no valuation increase at all.13
But after two years of fighting headwinds, the private market may be poised to benefit from broader trends. The U.S. IPO market grew significantly in Q1 2024 with 49 public offerings, up from 33 in Q1 2023. Meanwhile, the size of these listings also increased substantially, with proceeds jumping by 230% since last year to reach $8.4 billion, according to EY.14
The IPO pipeline continues to grow as well, with unicorns like cybersecurity company Rubrik15 and fintech company Klarna16 expected to IPO in the coming months, along with a broader set of companies with the potential to go public this year.17
M&A activity has also been picking up, with deals totaling nearly $780 billion globally in Q1 2024, up 22% year over year, based on Dealogic data.18 Tech has also looked strong, with the sector having the highest M&A deal value of any industry in Q1 2024, according to Dealogic data reported by Law360.19
Overall, March showed promising signs for the private market. If that momentum continues into the second quarter, it seems reasonable that valuations may rebound, even though a recovery will likely vary across sectors and individual companies.
The Forge Private Market Index was up 5.2% in March
During March, the Forge Private Market Index posted positive performance of 5.2%, the strongest month since 2021.20 For the month, the Forge Private Market Index outpaced many comparable public equity ETFs, trailing only the Renaissance IPO ETF.
For Q1 2024 altogether, the Forge Private Market Index was up 4.5%, posting its best quarterly performance since 2021.21 Despite the positive quarter, the private market still trailed comparable public equity ETFs, as the first three months of 2024 saw a new all-time high for the Nasdaq and 22 new highs for the S&P 500.22
In March, the distribution of premiums/discounts to the last primary funding round remained roughly in line with prior time periods. For the month, private companies on the Forge platform traded at a median discount of -51%, which is roughly consistent with the last four quarters. The top 10% companies traded at a +37% premium to their last primary round valuation, while the bottom 10% declined slightly to a -78% discount.
In March, the median bid/ask spread on Forge Markets fell to 9.5%, below the four-year median, suggesting that buyers and sellers are coming closer on pricing levels.
IOI data suggests increasing demand for private companies
During March, the percentage of buy IOIs exceeded 61%, the highest level since November 2021, and building on February’s total of nearly 55%. The increasing proportion of buyers could signal higher demand for private companies.
In addition to rising buy interest, the overall number of IOIs on Forge Markets grew as well, with a 45% increase from Q1 2024 compared with Q4 2023. Meanwhile, the number of distinct companies with at least one sell IOI on Forge Markets hit 208 in March, the highest level since August 2023.
Primary market data shows a more mixed picture
While secondary market metrics signaled a potential recovery, primary market data shows a more nuanced picture. In Q1 2024, companies on the Forge platform raised the most capital in nearly two years. However, as the below chart from the Q2 Forge Investment Outlook shows, more than half of the rounds in Q1 2024 were down or flat, suggesting that capital remains expensive for companies seeking an infusion of cash.23
Number of funding rounds and money raised for mid- and late-stage companies
Other data highlights the challenging fundraising environment. For example, in Q1 2024, the median company on the Forge platform raised capital at an effectively flat valuation compared to its previous funding round. Even the best-performing companies are not achieving substantial valuation increases when raising primary capital compared to previous years. These levels suggest that while some core metrics have begun to show glimpses of the bullish 2021 environment, pre-IPO companies likely still have a long road to recovery.
About the Author
Craig Derbenwick led the development and execution of cross-channel marketing and thought leadership content at Forge. Before his tenure at Forge, he spent 15 years in financial marketing roles and as a consultant for asset management and fintech companies. Read more from Craig.