February 2024 Report: The IPO Second Movers

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As the IPO markets threaten to heat up in 2024, we take a look at the next slough of IPO candidates.

As we have discussed in previous newsletters, there is a clear divide forming between the recent performance of public equities and the continued lag of venture backed startups.

The main issue of concern is the bottleneck that has formed for late stage companies. Many are still weary of how they will be accepted by the public market and haunted by the ghosts of their 2021 and 2020 valuations. While some finally took the plunge, their performance has been somewhat disappointing. Instacart as of the time this was written is trading at around 20% below its $30 a share IPO price, and Klaviyo is 7% below its IPO price. However, the underperformance of Instacart and Klaviyo has not deterred all later stage companies. In this month’s newsletter intro, we are going to look at the 3 candidates that are looking to IPO in the next couple of months.

Of the three companies we are going to discuss today, Reddit is likely at the top of everyone’s watch list for how they fair in the public market. The social media platform would be the first IPO of a major social media company since Pinterest in 2019. The company is planning to make its public filing in late February, followed by a roadshow early March, meaning they ideally IPO by the end of March. However, like Instacart, their valuation is taking a hit from the heights of the venture boom. According to the press, the company has been advised to target a valuation of at least $5 billion, about half of the $10 billion valuation the company raised at in 2021.

Another notable IPO contender for the near term is Rubrik, who recently announced that they are planning to go public as early as April. The holdup? Handling a U.S. fraud investigation into one of their employees. The cybersecurity software startup is backed by Microsoft and was valued at $4 billion in 2021. The company is likely going to be looking for a valuation close to that $4 billion of their last raise, and they are expected to try to raise roughly $500 million in the IPO.

Astera Labs is probably the least well-known of these three companies, but its aiming to be one of the first firms to go public off of the boom in artificial intelligence. The company, which is backed by Sutter Hill Ventures and Intel, sells crucial data center components to customers like Amazon Web Services and Microsoft. Astera expects it will generate between $250 million and $300 million in revenue this year. The company was profitable last year, and has just over 200 employees as of October. The company has been meeting with prospective investors ahead of a potential March IPO, and could be valued at as much as $4 billion if investors value it at the same multiple they used for Credo, a similar publicly traded data infrastructure company.

Why this matters: The IPO backlog is long overdue to go out. With continued improving market conditions, and indications from the Fed that they will be lowering interest rates in the next year, the environment could be the best one we have seen in a hot minute for companies looking to hit the private markets.

For employees at companies that are expecting a near-term IPO, knowing what to do with your stock options can be a challenge. Check out ESO’s commentary in Fortune for advice to employees going through this process!

More tech startups are expected to IPO this year–but stock option decisions are becoming more complicated for their employees | Fortune

For more insights from ESO Fund check out our newsletter ESO's Monthly Start-Up which lands in your inbox the first Tuesday of every month.

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