The current secondaries market is particularly active for a select group of startups, though only a fraction of unicorn companies are experiencing liquidity. According to Tom Callahan, CEO of Nasdaq Private Market, which became independent from the Nasdaq stock exchange in 2021 and recently introduced a platform for employees of startups to trade shares, approximately 1,200 unicorns exist globally, yet only 25 have liquidity in the secondary market.
Notably, high-profile companies such as SpaceX, OpenAI, Databricks, Anthropic, Groq, Perplexity, and Stripe are garnering significant attention. However, many other unicorns are not seeing their shares bought on the secondary market. Callahan notes several reasons for this, including the fact that private companies can approve or deny these trades, with some never allowing them. Additionally, there is often a lack of information available to potential investors who are not board members, leaving them without insight into company management or financial status.
Establishing a position in a company without access to this information involves significant risk, especially if there has been no formal liquidity event since the peak of the venture boom, making it challenging to agree on a fair valuation for shares, Callahan explains.
For those companies engaging in secondary market activities, investor interest is reportedly high. The market for mergers and acquisitions (M&A) has slowed due to regulatory scrutiny from the Federal Trade Commission, and the initial public offering (IPO) market is quiet. Meanwhile, venture capital (VC) firms with aging funds are seeking exits to return capital to their limited partners, creating a pool of investors eager to acquire shares in promising companies at potential discounts.
Despite this interest, transactions remain concentrated among only a few companies, leaving uncertainty about valuations across the private market landscape. Callahan suggests more primary funding rounds and tender offers from unicorns could shift this dynamic.
He notes that the stigma attached to down rounds has diminished, as numerous companies have undertaken them, highlighting an increase in tender offers. Callahan reports a significant uptick in tender activity this year compared to 2023, with more tenders completed by May 2024 than in the entire preceding year.
Although the private market is slow to adapt, it appears to be on the verge of catching up.
Additionally, various venture deals were announced, including Lightmatter, a photonic supercomputing developer in Mountain View, California, raising $400 million in Series D funding, and Alchemy, a company that develops in-house pharmacies for HIV clinics in San Francisco, securing $31 million in seed funding.
In the realm of private equity, RESA Power, supported by Investcorp, acquired Prime Engineering, and Tekmetric, backed by Susquehanna Growth Equity, acquired Shopgenie.
Forbion, a venture capital firm based in Naarden, the Netherlands, raised significant funds directed towards life sciences companies. Furthermore, several new team members were appointed in various investment firms, exemplifying the dynamic nature of personnel changes within the industry.