In conjunction with our Q3 2023 Venture Financing Report, Harley Brown sat down with Genevieve Kinney of General Catalyst to get her take on the state of venture capital investing.
Key insights from Genevieve Kinney
On the initial public offering (IPO) markets as we look ahead to 2024: “We think some of the larger enterprise companies will wait on additional clarity in the economic environment to make moves on an IPO … we expect to see more significant activity in the early second half of 2024, as companies seek to go public in advance of the 2024 election and when we have another two quarters of economic data. Performance of public companies and the broader equity market will be key factors in companies’ willingness to go public; however, public investors will need to grapple with investment opportunities in undervalued stocks with proven track records and new issues that have – unfortunately – had spotty trading records when looking at recent IPOs. We think the bar is very high for companies that are looking to maximize value at IPO and maintain consistent trading performance, and those that aren’t in a rush will continue to wait it out until Q4 2024 or, more likely, 2025.”
On the less-than-positive changes in the software as a service (SaaS) industry: “The democratization of the SaaS business model has enabled tech ecosystems to form and flourish around the world, but increased competition and investor sophistication has continued to make funding more difficult to obtain. The positive is that many companies in this newer SaaS cohort are stronger, more efficient and more profitable than those before them.”
On the trend of mid-stage rounds being down: “Market uncertainty over the fundamental stability of the economy, direction of monetary policy and outlook for corporate earnings have made mid-stage growth (particularly Series B) challenging to underwrite over the last six months. With limited execution proof points in the businesses, and a longer path to exit with an unclear view on where multiples stabilize, we have seen investors move in a barbell fashion to earlier, founder investments, or enter into later-stage businesses that may be doing down or structured rounds or offering secondary at a discount. In both cases, investors have been looking to mitigate their risk in either capital invested or valuation.”