We’ve hit the half-year mark of 2024 and, as we discussed in our revised IPO Outlook, there are a number of macro trends that investors have on their minds as they look to the public and private markets. Of note, interest rates remain top of mind for investors. In the US, many hope the Federal Reserve will follow the rate reductions taken by the European Central Bank and the Bank of Canada. The Fed is expected to consider one reduction this year (down from three or more assumed at the start of the year), but they are looking at job market performance and inflation markers – both of which scared investors with less positive trends reported in early July. We saw the highest unemployment rate since November 2021 and the Personal Consumption Index (PCI) fell slightly above the forecasted 2.7% rate. Both had immediate negative effects on the public markets.
The beginning of the year saw early entries into the IPO market with Reddit and Astera Labs, however the 2nd quarter calendar was quiet.
In the private markets, Pitchbook has reported that “global VC fundraising is on track for its worst year since 2015” and notes that emerging managers (managers with fewer than four funds) have raised less capital. Larger “blue chip” VC firms are still raising funds, but may be hesitant to back startups who are already skittish on testing the public markets.
Diving into the private secondary market, where EquityZen operates, we will highlight trends observed for individual investors in Q2.
Retail Investors Return
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In 2023, we saw growing interest from institutional investors. In 2024, we observe the return of individual “retail” investors who are starting to come back into the market. As reflected in the chart above, institutions were quicker to deploy capital to take advantage of attractive buying opportunities when discounts (relative to the last round of financing) were the deepest, as seen in the chart below. As the broader market has continued to improve and volatility has subsided, retail activity is picking up. As a % of overall activity, retail investors are actively participating in the market more than we've seen over the past few quarters.
According to our proprietary data, we can dig into who is joining the markets. We are seeing enormous interest and growth with new individual investors joining our platform at a rate almost twice what it was in late 2023. We are seeing quarter-over-quarter upticks, which speaks to the growing interest in pre-IPO investing, especially during a quiet IPO market. Investors are tapping the private markets to access innovating companies across a variety of sectors.
Discounts shrink
Looking at EquityZen’s “Premium and Discount Trend” below, we see what likely brought institutional investors in last year – discounts on companies where large investors remained bullish. The old mantra “if you liked it at $20, you’ll love it at $10” holds true. However, discounts are lessening vs. prior quarters. This speaks to a recovery in valuations (both public and private) from the lows we saw in 2022 and 2023. Strong private companies that continue to grow are trading closer to, or even above, their last round of funding, even with revenue multiples normalizing vs 2021.
Interested in browsing the private company investment opportunities available on EquityZen's marketplace?
Our Zen 10, which tracks the top trending industries amongst EquityZen investors, saw more traditional industries – Software as a Service (SaaS) and Manufacturing – grow in popularity. While AI, Information Technology and Fintech companies continued to hold the top spots.
Not all pre-IPO companies will go public or be acquired, and not all IPOs or acquisitions are or will become successful investments. There are inherent risks in pre-IPO investments, including the risk of loss of the entire investment, illiquidity, and fluctuations in value and returns. Investors must be able to afford the loss of their entire investment.
Interested in browsing the private company investment opportunities available on EquityZen's marketplace?
