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Q3 2024 Forge Investment
Outlook

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Private market shows no signs of slowing down in Q2

July 18, 2024

Bolstered by an improving macroeconomic backdrop and continued investor demand for artificial intelligence companies (or companies integrating AI into their businesses), both public and private markets enjoyed a strong second quarter, a welcome outcome for investors as the summer arrives and vacations beckon.

Key Takeaways

  • The private market continued its upward movement in Q2 - The Forge Private Market Index outperformed the Russell 2000 and Renaissance IPO index in Q2, though it trailed the large-cap S&P 500 and NASDAQ 100 indices. Fintech was the strongest performer among eligible sectors this quarter, and more companies in the index were marked up versus marked down.

  • Investor enthusiasm remains high despite reduced primary fundraising - Although Q2 saw slightly less money raised and fewer primary rounds than Q1, there are multiple signs that investors remain positive on private companies. New unicorns are being minted across diverse sectors and recently funded companies continue their trend of raising up-rounds.

  • Secondary market metrics continue suggesting investor optimism - Secondary market investors showed sustained interest in AI and fintech companies in Q2, as evidenced by a bid-ask spread of 6.4% (compared to the 3-year median of 11.4%), as well as completed trade data that demonstrated an improved discount to primary valuations on average. Meanwhile, companies exercised their right of first refusal (ROFR) at slightly higher rates quarter-over-quarter.

INSIDE THE REPORT
  • Market Performance 6
  • Primary Market Activity 12
    • Funding Round Step-Up Distribution 15
    • New Unicorns 16
    • Largest Step-Ups and Step-Downs for Unicorns 17
  • Secondary Market Activity 18
    • Funding Year Cohort Forge Price Performance 19
    • Trade Price Distribution 20
    • Indications of Interest Bid-Ask Spread 21
  • Mutual Fund Marks 25
  • Exit Activity 28
    • Exit Trends 29
    • Q2 Completed and Announced Exits 30
    • Select Q2 IPO Forge Price Analysis 32

Forge Private Market Index outpaces comparable Public Market benchmarks while slightly trailing large caps

The Forge Private Market Index (FPMI) rose 0.8% in Q2 2024, trailing the SPY (S&P 500) and QQQ (NASDAQ 100) ETFs but outpacing the IWM (Russell 2000) and IPO (Renaissance IPO) ETFs during the same period. In some ways, the Forge Private Market Index is more comparable to the Russell 2000 than the S&P 500.

Forge Private Market Index continues increasing trend of individual companies being marked up, fewer markdowns

In the second quarter, 36% of companies in the Forge Private Market Index were marked up, continuing an upward trend that started in Q3 2022 and representing the highest percentage of markups since Q4 2021. Nine companies were marked up by >20%, and the average performance of companies marked up was +20%, a decline from last quarter’s average 33% markup of companies marked up in Q1. 40% of companies were marked down in Q2 2024, an improvement on last quarter – although the average markdown increased slightly to -16% from -14%.

Investment interest remains skewed to the buy-side on Forge Markets in Q2 2024

As of the end of Q2, the buy-side represented 55.2% of all IOIs on Forge Markets, a small decline from this year’s high of 61.4% in March but overall showing a continuation of the buy-side trend that started at the beginning of the year. Thus far in 2024, only two months have seen more sell-side than buy-side demand.

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Authors
Andrew Alden
Senior Director of Quantitative Research, Forge

Andrew Alden, CFA, serves as Senior Director of Quantitative Research at Forge Global, where he leads a research team focused on the private market. Prior to this role, Andrew launched Semantiqa, an investment management firm, which focused on the public-market growth equities space.

Dan Chaparian
VP, Product Marketing, Forge

Dan Chaparian led Product Marketing at Forge Global. Prior to Forge, Dan was VP, Global Product Marketing, for BlackRock's iShares ETF business. He previously held positions at Apple and Uber and is a former startup founder.

Riley Martin
Senior Data Analyst, Forge

Riley Martin is Senior Data Analyst at Forge Global. Before joining Forge, Riley was a Consultant for Strategy and Analytics at Deloitte, assisting large tech clients with in-depth analysis of global data.

Louis Metzger
Senior Financial Analyst, Forge

Louis is a Senior Financial Analyst at Forge Global, focusing on valuations and private market trends. Before joining Forge, Louis worked in corporate finance at Initiative Media and was a startup founder.

Disclaimers

About Forge

Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants.

Legal Notices and Disclosures

© 2024 Forge Global, Inc. and its affiliates. All rights reserved. Investing in private company securities is not suitable for all investors, is highly speculative, is high risk, and you should be prepared to withstand a total loss of your investment. Private company securities are highly illiquid and there is no guarantee that a market will develop for such securities. Each investment carries its own risks, and you should conduct your own due diligence regarding the investment, including obtaining independent professional advice. Past performance Is not indicative of future results.

This is not a recommendation, offer, solicitation of an offer, or advice to buy or sell securities by Forge Securities LLC (“Forge Securities”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where Forge Securities is not permitted to offer brokerage services. Registered representatives of Forge Securities do not (1) advise any party on the merits of a particular transaction; (2) assist in the determination of fair value of any security; or (3) provide legal, tax, or transactional advisory services. Securities and investments are offered only to customers of Forge Securities, a registered broker-dealer and member FINRA & SIPC. Securities referenced in this article may be offered by Forge Securities, and certain Forge affiliates may act as principals in such transactions. See Forge Global, Inc. and its affiliates’ Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures.

Forge Price™ is calculated and disseminated by Forge Data LLC (“Forge Data”). All rights reserved. Forge Price™ is designed to reflect the up-to-date price performance of venture-backed, late-stage companies. Forge Price™ is determined based on a proprietary model incorporating the pricing inputs from primary founding round information and secondary market transactions, including indications of interest (IOIs).

Secondary market transactions are sourced from Forge Securities LLC (an affiliate of Forge Data), a leading market platform, and data collected from other private market trading platforms. The Forge Price™ is a mark of Forge Data. The Forge Price™ is solely for informational purposes and is based upon information from sources believed to be reliable, however Forge Data makes no assurance as to the accuracy or reliability of this data. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset or asset class. Private company securities are highly illiquid, and the Forge Price™ may rely on a very limited number of trade and/or IOI inputs in its calculation. Brokerage products and services are offered by Forge Securities LLC, a registered broker-dealer and member FINRA/SIPC.

Neither reference to company names, nor calculation of Forge Price™ for a particular company(ies) implies any affiliation between Forge or its affiliates and any company, any endorsement or sponsorship of Forge or its affiliates by any company or vice versa, or any partnership, joint venture or other commercial relationship between Forge or its affiliates and any company. Rights with respect to any company marks referred to herein are, as between Forge and its affiliates and such company, owned by the company.

The information contained herein is based on currently available information, and Forge undertakes no obligation to update any of such information or to reflect new information or the occurrence of unanticipated events, except as required by law. While Forge believes such information forms a reasonable basis for the contents of this Investment Outlook, such information may be limited or incomplete, and this content should not be read to indicate that Forge has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. This Investment Outlook contains trademarks, service marks, trade names and copyrights of Forge and may contain those of other companies, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products is not intended to, and does not imply, a relationship with Forge or any of its respective affiliates, or an endorsement or sponsorship by or of Forge or such affiliates. Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this Investment Outlook may be listed without the TM, SM, (c) or (R) symbols, but Forge will assert, to the fullest extent under applicable law, the right of the applicable owners, if any, to these trademarks, service marks, trade names and copyrights. The performance of the Forge Private Market Index with respect to the growth of $10,000 shown herein does not represent the performance of any actual investment, as you cannot invest in the index, but rather reflects the hypothetical growth of a $10,000 investment in a basket of securities based on the index. Additionally, the chart assumes reinvestment of dividends and capital gains in the constituent securities but does not reflect any fees or commissions that may be incurred in purchasing or selling such securities, which would lower the figures shown if included. Further, $10,000 may not be a sufficient amount to invest simultaneously in all securities contributing to the performance shown, which would further prevent an investor from matching the performance shown. The performance shown represents past performance, and past performance is not indicative of future results.

The Forge Private Market Index is calculated and disseminated by Forge Data LLC ("Forge Data") and is a mark of Forge Data. All rights reserved. The Forge Private Market Index is calculated and disseminated by Forge Data and is a mark of Forge Data. The Forge Private Market Index is solely for informational purposes and is based upon information from sources believed to be reliable. It is not possible to invest in the Forge Private Market Index, and Forge Data makes no assurance that any investment products based on or underlying the Forge Private Market Index will accurately track index performance or provide positive investment performance. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset classes or investment vehicles. Private company securities are highly illiquid, and the Forge Private Market Index may rely on a very limited number of trade and/or indication of interest inputs in its calculation. Brokerage products and services are offered by Forge Securities, a registered broker-dealer and member FINRA/SIPC. By downloading this content, you acknowledge that you have reviewed and are subject to the Forge Private Market Index disclaimers and disclosures which contains other important disclaimers, disclosures and restrictions related to the Forge Private Market Index. Additionally, if you are accessing this content away from forgeglobal.com, you acknowledge that you have reviewed and are subject to Forge’s Terms of Use with respect to use and distribution of information as if you were accessing this content on forgeglobal.com.