Following a blistering 2021, the private market reversed course in 2022 and continued to lag public equity markets last year. In 2023, the Forge Private Market Index declined by over -20%,1 compared to a more than 20% gain for the S&P 500.2 The IPO market all but froze. VC funding went from seemingly a free-for-all to a closely guarded prize.
Now, however, there appears to be light at the end of the tunnel, though it hasn’t been an even recovery. In February, the Forge Private Market Index turned positive, up 0.26% for the month.3 There remains broad divergence among individual company performance in the index. For instance, tech hardware company Astera Labs (+38%) — which announced plans to go public in March 20244 — has been the best-performing company in the index in 2024 from January 1 to February 29, 2024.5 On the other hand, social media company Discord, productivity software company Workato, and communications software company Intercom have all declined by more than -20% in 2024 through February 29, 2024.
Several private market metrics showed encouraging signs in February. For the first time since November 2021, the number of buy indications of interest (“IOIs”) on Forge Markets exceeded the number of sell IOIs. In addition, after spiking in January, the bid-ask spread tightened to 10.8%6, suggesting that buyers and sellers are coming closer together on pricing.
However, despite these encouraging signs, the private market continues to significantly trail the performance of public equity markets. Both the SPY and QQQ ETFs returned a little over 5% in February.7 The private market has historically moved more slowly than public equity markets on both the upside and downside, so strength in the public markets has the potential to translate into better prospects for private companies as well after a lag period. In addition to the major equity indices, the Renaissance IPO ETF, which tracks companies that have gone public within the past three years, had an even stronger month, returning more than 15%.8
The tech world overall has been buoyed by broad interest in AI and the infrastructure required to power large language models and other innovations.9 Of note, blowout earnings by semiconductor company Nvidia in February lifted the company’s market cap by a record $277 billion in just one day and benefited other AI-related companies.10
Perhaps unsurprisingly, AI companies received a large proportion of VC funding in February,11 seemingly reinforcing widespread investor interest in harnessing innovations in AI technology. Overall, global VC funding was flat month over month in February, although early-stage companies had their highest month of funding since June 2023, according to Crunchbase data.12
Meanwhile, the IPO pipeline looks prepared to emerge from a long slumber, with companies such as Astera Labs, Reddit, and Rubrik poised to go public soon at multi-billion-dollar valuations.13 Other companies considering IPOs include Telegram Messenger,14 and Shein is eyeing a public listing in London following some hurdles in the U.S.15
If the IPO market continues to thaw and VC purse strings loosen, then that could potentially lead to more demand and higher pricing for private companies across the board.
The Forge Private Market Index turns positive but trails record-breaking public markets
During February, the Forge Private Market Index was up 0.26%, the first positive month since August 2023.16 For the month, the Forge Private Market Index continued to trail public equity indices as both the S&P 500 and Nasdaq indices broke new records, driven by strong performance by technology companies and an improving inflation outlook.17
The private market continues to separate. Top-performing companies continue to show strength, as companies at the 90th percentile are trading at a 75% premium to their last funding round. The discount for the lowest performers moved up slightly to -77%, though the spread between the top and bottom continued to increase from recent levels.
The median bid-ask spread on Forge Markets fell to 10.8% in February, suggesting that buyers and sellers are coming closer on pricing. The February level fell below the long-term average of 11.6% (covering the time period of January 1, 2020, to January 31, 2024).
During February, the number of issuers with sell IOIs on Forge Markets remained relatively consistent. Coupled with tightening spreads, this suggests continued demand from both buyers and sellers in the private market, particularly as buy IOIs surpassed sell IOIs in February for the first time since November 2021.