Interview, Fireside Chat
Jason Lemkin: Every VC has a FRAUD in their portfolio; The IPO market is about to EXPLODE | E1046
- The market is projected to recover from current lows to 2021 peak levels only after approximately 20 years, with enterprise software spending expected to bounce off the bottom following a period of optimization and layoffs.
- The year 2024 is predicted to feature a rich IPO environment, including a potential "IPO week" with 10 significant offerings for companies valued over $10 billion in the back half of 2024.
- Specific entities such as Algolia and Parklet Greenhouse, currently valued at $200 million, are expected to complete IPOs next year.
- IPO timelines face delays due to accounting and regulatory requirements, with the best-case scenario for companies initiating the process being late Q1 or Q2 of the following year.
- Valuations for 2024 IPOs are expected to be solid and "good" but not "insane," with a flood of SaaS companies generating over $200 million in revenue preparing to go public as conditions align.
- Seed investing is expected to remain vibrant with no downturn, though seed rounds priced to perfection may remain inaccessible to traditional funds, forcing investors to focus on "outsider" founders.
- Multi-stage funds may cease deploying small pre-seed checks due to the mathematical difficulty of returning large funds through such investments, while the trend of founder-led funds continuing to grow persists.
- Investors expect to wait for companies to reach $1 million to $2 million in revenue before entering crowded AI categories like outbound sales tools, and cannot make money investing in current hot seed startups.
- A fund with a $68 million size would require a $70 million investment to secure a 10% stake in a company valued at $750 million, illustrating current valuation dynamics.
- Seed companies failing to raise a Series A within 24 months of their initial round face potential failure or the necessity of raising a "normal" round after gaining humility.
- Series A and B markets are expected to remain difficult until founders adjust expectations to match growth investors' requirements for rationality.
- Founders in the current market are exhibiting indifference to long-term valuation dilution, a behavioral shift noted by the speaker.
- Founders who raised at high valuations without product-market fit are advised to offer to return 100% of capital to investors.
- A massive wave of startups with 10 years of runway and no traction is not expected to return for 20 years, contrasting with the prior "Zerpa phenomenon."
- Significant churn is expected at the $2 billion+ fund level as Limited Partners realize the economics of such large funds are becoming nearly impossible.
- Capital is expected to concentrate in managers with $250 million to $750 million sizes who possess both track records and DPI, while massive pools like sovereign wealth funds continue seeking funds capable of absorbing hundreds of millions in deployment.
- The trend of founders and executives making massive liquidity exits to increase angel investing supply is expected to continue, despite the 2021 boom of emerging managers potentially being over.
- Strategies involving high-risk ventures like disease and space treatments are not anticipated to be the primary path for seed investors.