newsfilter.io

Ed Sim & Jamin Ball: Did Figma Kill M&A Markets & 3 Requirements to IPO in 2024 | E1101

20VC with Harry StebbingsEd Sim, Jamin Ball, Harry Stebbings
Watch on YouTube →
  • Large-scale M&A transactions in 2024 face significant regulatory hurdles, likely restricting deals to specific sectors like cybersecurity, while private-to-private transactions and smaller strategic acquisitions or "acqui-hires" are expected to increase as acquirers like Palo Alto Networks fill portfolio gaps.
  • Companies aiming for an IPO in 2024 must demonstrate 30% or more growth and move toward a Rule of 40 or 50 metric with a focus on growth, though many will face down rounds compared to 2021 valuations, with the IPO window anticipated to open in the back half of the year following a six-to-nine-month preparation period.
  • The venture capital market is characterized by high capital supply chasing scarce high-quality founders, leading to a normalization of 1X returns for late-stage investors to enable capital recycling, while companies with 5 to 10 million ARR valued at 300 to 500 million may struggle to exit without substantial growth.
  • Public market multiples are projected to average seven to eight times forward revenue, rendering the 100x multiples from 2021 unsustainable without massive top-line expansion, forcing companies to either achieve financial fitness or face drastically lower valuations.
  • A new cycle of creative destruction is expected over the next 10 to 20 years driven by AI integration, spawning specific enterprise categories such as AI security with needs in ML SecOps and "ML bombs," alongside a resurgence in data infrastructure platforms and edge AI development.
  • Microsoft is forecasted to drive significant growth in the back half of 2024 due to AI leadership and cloud market share gains, while software sector growth rates are anticipated to stabilize between 110% and 140% retention as customers settle.
  • Founders and boards are urged to engage in honest conversations regarding the feasibility of growing into current valuations within three years, with a shift away from high-valuation fundraising toward the older model of raising smaller amounts frequently based on milestones.
  • 2024 is characterized as the bottom half of a valuation reset combined with the early stages of a massive technology shift, creating a "fucking incredible vintage" for early-stage investors five years hence, with Israeli founders in security and infrastructure viewed as resilient opportunities despite geopolitical risks.
  • Future success will likely depend on solving tangible problems through "boring" business models rather than "sexy" consumer social products, with "zero-to-one" funding strategies for "lights-out founders" remaining crucial for early-stage progression.
  • Market saturation is not the primary issue; rather, a deceleration in growth due to the vaporization of startups buying technology from other startups has created a disconnect between 2021's projected post-COVID world and current realities, necessitating a return to product-market fit.