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Private equity (PE) and venture capital (VC) influence soared, backing almost half of 2024 IPOs by proceeds
In 2022 and 2023, the proportion of PE- and VC-backed IPOs dropped to 5% and 6% by number, respectively, a significant fall compared to the past years’ levels. This downturn was primarily driven by rising inflation and interest rates, which eroded investor appetite. By 2024, improving conditions prompted these companies to revisit IPO plans, capitalizing on higher valuations and renewed investor confidence. Strong post-listing performance of earlier IPOs further fueled this resurgence, encouraging sponsor-backed companies to enter the market and provide liquidity for early stakeholders.
In 2024, public listings of PE- and VC-backed portfolio companies generated 46% of total global IPO proceeds, highlighting their substantial contribution to global IPO activity and reinforcing the critical role of PE and VC firms in shaping the IPO landscape. Out of the 20 mega IPOs in 2024, 12 were PE-backed, a significant increase from the two listed last year. There were also 18 unicorn IPOs listed in 2024, half of which were launched by VC firms, up from just three in 2023.
Valuation dynamics showed a sharp divide: PE-backed IPOs posted a 72% rise in median post-IPO valuations from 2023, while VC-backed IPOs saw a 31% drop in median valuations. However, the average valuation for VC-backed deals climbed, buoyed by a handful of mega IPOs. This reflects that the market continues to favor mature, established business models and proven profitability. Despite different valuation dynamics, both PE-backed and VC-backed IPOs have delivered solid returns for investors, reflecting strong demand across segments when companies successfully aligned with market expectations amid favorable market conditions.
The venture market has grown increasingly illiquid despite a significant rise in the number of VC-backed companies over the years. Since 2022, only a small fraction have secured funding, with even fewer raising more than US$20m. Greater focus has shifted to AI-focused companies, where substantial capital demands make public markets a compelling solution. With more than 600 AI and AI-related companies now public — nearly half debuting in the past four years, many with VC backing — the sector demonstrates how IPOs can help overcome funding challenges while driving innovation and growth. Approximately 60 such companies are in IPO registration, and more than 400 others remain in the pipeline. Among these, around 150 are privately held AI unicorns, underscoring the sector’s immense potential.
If the AI vertical could establish a benchmark in successful IPOs, it could encourage other high-growth verticals to pursue IPOs, fueling broader market momentum in future years. The cryptocurrency space, with most companies backed by VC firms, is also gaining momentum. With token prices hitting new highs and the US market approving ETFs for bitcoin and Ethereum, interest in digital assets has surged. There are currently around 80 VC-backed cryptocurrency companies in the IPO pipeline. Of these, about half have reached unicorn status, indicating significant potential despite the vertical’s smaller scale.
Post-election regulatory reforms, along with eased financial conditions, could further stimulate their market activity. However, the success of IPOs in these emerging verticals will hinge on navigating regulatory challenges and showcasing robust compliance structures.