Private Markets Q2 Report (so far)
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Funding Rounds in AI
Until now, in Q2 2024, the US growth and venture capital market saw several significant funding rounds, particularly in the AI sector.
Scale AI: Scale AI secured $1.6 billion in funding over nine rounds, with their latest Series F round raising substantial capital to support their AI data annotation platform. This round saw participation from notable investors such as Meta and WCM Investment Management.
xAI: Founded by Elon Musk, xAI has generated considerable attention, closing a $6 billion round at $ billion post-money valuation. xAI focuses on addressing the most challenging issues in AI, positioning itself as a significant player in the AI field.
Anthropic: Anthropic, an AI safety and research company, raised $4 billion this year. The company received significant backing from Amazon and Google, highlighting its prominence in the generative AI space.
Inflection AI: In June 2024, Inflection AI raised $1.3 billion in a funding round led by Microsoft, Reid Hoffman, Bill Gates, Eric Schmidt, and Nvidia. This round valued the company at $4 billion and was aimed at expanding its AI-powered assistant, Pi.
Databricks: Databricks, known for its AI-enhanced data analytics platform, raised $685 million in a Series I round led by T. Rowe Price. This round valued the company at $43 billion and included participation from Nvidia.
These funding rounds highlight the robust interest in AI technologies despite broader market uncertainties and economic challenges. The focus on AI reflects its growing importance and potential impact across various industries.
Secondary Markets
So far, during Q2 2024, the secondary market for large, growth-stage private companies in the US saw notable activity and key trends. Here’s a summary of the most significant developments:
Increased Trading Activity: Secondary Platforms reported a significant increase in indications of interest (IOIs), with a 45% rise in Q1 2024 compared to the previous quarter. This marked the highest proportion of buy-side IOIs in 28 months, indicating heightened investor interest in acquiring private company shares. An uptick in trading volumes is also visible on Addepar’s Update, Q2 2024.
Unicorns and High-Value Companies Leading Trades: Databricks, SpaceX, and Chainalysis were among the most actively traded on secondary platforms. This activity is driven by a combination of high valuations and the desire of employees and early investors to liquidate their holdings ahead of potential IPOs.
Valuation Adjustments: The gap between buyer and seller expectations for private securities, which had reached a record high in late 2022, began to narrow in the first half of 2024. This adjustment improved the prospects for matching trades and facilitated more transactions in the secondary market.
Market Dynamics: The secondary market has become a vital liquidity source for stakeholders in private companies, especially given the subdued IPO market. Given the extended timelines to public exits, employees of unicorns are increasingly turning to secondary platforms to monetize their equity.
Regulatory Environment: Ongoing regulatory scrutiny, particularly from the SEC, focuses on enhancing investor protections and improving market structure in the private market. This includes potential new rules that could hold venture capitalists more accountable for their due diligence practices, which may impact the secondary market dynamics.
Overall, the secondary market for large US private companies in Q2 2024 demonstrated robust activity with growing investor interest, especially in high-value unicorns, and a more balanced buyer-seller dynamic facilitating increased transactions.
Preparation for IPO
The pre-IPO landscape is bustling with activity as several high-profile companies prepare to go public. Here's a summary of some notable developments:
Databricks: Databricks, known for its data processing and AI capabilities, recently secured a $500 million investment from Nvidia, elevating its valuation to $43 billion. The company has shown impressive growth, achieving a $1.5 billion revenue run rate.
Cerebras Systems: This AI hardware company is gearing up for an IPO possibly by the end of 2024. With its unique AI computing platforms, Cerebras aims to capitalize on the increasing demand for AI infrastructure.
Circle: Best known for its USDC stablecoin, Circle has confidentially filed for an IPO. This move highlights its ambitions to streamline global financial transactions.
Klarna: The Swedish fintech company providing BNPL services is expected to go public, potentially through a Dutch auction. Klarna's IPO could occur as soon as Q3 2024.
Skims: Co-founded by Kim Kardashian, Skims has seen rapid growth and profitability, making it a strong candidate for an IPO in 2024. The company focuses on body-positive apparel and has achieved significant market traction.
Monzo: The UK-based digital bank is exploring an IPO, likely in late 2024 or early 2025. With a valuation of around £4.5 billion, Monzo continues to expand its customer base and international presence.
Fanatics: Known for its sports merchandise, Fanatics has made strategic acquisitions and may soon go public. The company is valued at around $31 billion.
These companies are part of a broader trend of technology and fintech firms aiming to leverage public markets for growth and expansion. Investors should stay tuned for further developments as these IPOs progress.
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Disclaimer
Private companies carry inherent risks and may not be suitable for all investors. The information provided in this article is for informational purposes only and should not be construed as investment advice. Always conduct thorough research and seek professional financial guidance before making investment decisions.
