- Rising interest rates and limited VC funding have slowed IPOs in the tech sector.
- With Instacart, Arm, and Klaviyo going public, the IPO market could be reviving this year.
- BI profiled 11 startups that are expected to IPO, according to PitchBook’s Exit Predictor.
It’s been a relatively quiet few years for public debuts.
Initial public offerings (IPOs) have slumped since the record-breaking 2021, when the the likes of likes of Roblox, UiPath, and Rivian listed.
The market hasn’t been helped by rising interest rates and a slump in venture capital funding, which has slowed down activity in late-stage startups.
But two years on, there is a growing sense of cautious optimism. While the volume of IPOs dipped 7% in the opening quarter of 2024, proceedings from those listings jumped 7% to $23.7 billion, according to data from EY.
In addition, there has already been a high-profile listing this year in the form of social media giant Reddit. It followed listings by the likes of Instacart and Klaviyo as well as chip designer Arm late last year.
While these listings didn’t create a blockbuster exit effect as anticipated, companies such as Arm have fared well post-IPO, with shares picking up amid a surge in demand for semiconductor chips.
With a hefty backlog of startups waiting for the apt opportunity to exit, it seems like momentum is picking up again.
BI examined PitchBook data about which startups could be set to IPO this year. PitchBook uses a proprietary methodology — called its Exit Predictor — to calculate the probability of companies listing. This uses machine learning and its database of information about startups’ funding, investors, and credentials to gauge how likely an exit is.
The main component that decides the probability of a startup exit is PitchBook’s classification model. Using these probabilities, it “calculates a naïve expected return of an investment in the startup’s next financing round using historical returns by series derived from capitalization table data,” per PitchBook’s methodology document.
PitchBook normalizes these expected returns according to a percentile scale; this means that the final likelihood of an IPO is determined as a number between zero to 100, with the latter being the most “attractive” option of a startup publicly listing.
BI narrowed down the startups with over a 90% chance of an IPO, per PitchBook analysts. Here are the contenders.
