Trends: Tech IPOs Will Come Back In 2024

December 26, 2023

Two Year IPO Drought Coming To An End

In 2023, only 148 companies completed an initial public offering (IPO). This was the worst year on record and followed a 15% decline from the number of IPO's in 2022, another disappointing year. In 2023, ARM was the sole blockbuster tech IPO.

After a brutal two years with a paucity of tech IPOs, the market is poised for a resurgence in 2024. Why? The Federal Reserve is set to reduce rates two to three times, an election year usually bodes well for the general economy regardless of party, and a number of tech companies have patiently waited to go public and now have the numbers to make it so. Not all is rosy as consumers have entered a doom spend loop and have spent down $2.1T in savings since August 2021 and now sit on about 100B in savings (as of October 2023) down 90% in a short 26 months. Yet, a drop in Fed Rates will pave the way.

Tech IPO's Follow Market Trends

Constellation's analysis shows a strong IPO pipeline in areas such as AI, enterprise cloud software, financial tech, space tech, and specifically some of Elon Musk's companies should they pull the trigger. Simultaneously, smart money is leaving trendy categories in clean tech, ESG, and EV's. The backlash on ESG has had its impact on funding. The results of COP 28 highlight the populist and voter backlash elected officials face and many funds have closed and liquidity is rapidly drying up.

Tech IPO Watch List Startups

On the watch list are eight names:

Shein. Fast-fashion retailer from China could fetch $80 to 90B
Open AI. Despite the leadership drama which cut its valuation own to $50B, the ChatGPT startup is still a contender for 2023.
Databricks. Data and analytics company competing with SnowFlake is worth up to $50B
Stripe. The Fintech darling plays a key role in disrupting the payments world with an estimated $50B valuation.
Discord. The cool kids are on this modern social network and their recent valuations put them at $15B.
Reddit. Everyone's favorite social media forum is rumored to be valued at $15B.
Canva. This Adobe competitor is on fire with a potential $10B valuation.
ScaleAI. Alexandr Wang's play in AI could fetch as much as $7B.

Key Musk Companies Could Create Mega IPO's As Early As 2024

SpaceX. Estimates of $200B in market cap could place this IPO as big as Saudi Aramco and Alibaba at their time of listing. The space exploration technology company has paved the way for the privatization of space travel and disrupted the cabal of defense contractors and NASA in cost and reliability. Some estimate the IPO in 2027, but others expect an earlier split out of StarLink.
StarLink. While Elon Musk recently put a kabash on rumors that a spin-out of StarLink from SpaceX at an estimated $100B valuation was happening. The space communications market leader has proven its technology in civilian and military applications and could be more ready to spin out than SpaceX
NeuraLink. The ability to connect human brain waves to machines may seem SciFi at first, but this company has seen a valuation north of $5B
The Boring Company. At a $7B valuation, this transportation critical infrastructure tech company is not only useful for the terrestrial world, but may also play a big role in space.

AI Startup Ecosystems Do Differentiate by Regional Expertise

In mega categories such as AI, differences abound by region. For example, AI in:

San Francisco. Founders and startups typically are run by the under 30 set pushing a consumer AI startup in Cerebral Valley
Silicon Valley and Seattle. Startups here tend to lean towards an enterprise play with a grizzled veteran working on their 3rd AI startup or advanced chip design.
Toronto. The GTA area boasts some of the best math and next breakthroughs in General AI.
Boston Cambridge. AI projects focus on awesome math, hardware such as robotics, pharma research, and really smart chip design.
New York. Wall Street loves arbitrage and AI plays a huge role. However, this bleeds into Ad Tech, and of course pharma research.
Washington DC. Startups here focus in on the military and public policy.
London and Paris. Research here take a focus on policy implications on humanity. Startups tend to follow suit on creating paradigms for human and AI ethics.
Tel Aviv. Cybersecurity innovations abound here and military applications play a key role in the ecosystem.
Dubai/ UAE. AI startups have a big Web 3.0 component and funding in the Middle East is hot hot hot as the regulatory environment for crypo has brought significant investment into the region.

The Bottom Line: Expect 2024 To Be Start Of A Comeback Cycle For Tech IPOs

So long, interest rates come down, and the Fed sticks the soft landing in an election year, the market conditions look bright. With a number of Series C, D, and E startups showing good metrics in lower CACS, greater ARPU, and rule of 40 growth, 2024 looks to be the start of the comeback!

Your POV

Ready for the Tech IPO boom in 2024? What startups are you piloting that we should know about? Which is your big bet for IPO in 2024?

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