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June 20, 2024
PI Global Investments
Private Equity

Private equity could be the last resort for startups struggling to exit

After watching Lucy pull the football from Charlie Brown’s foot at the last possible moment time and time again, we have learned our lesson and are therefore hesitant to believe that 2024 will be the year of the IPO market’s return. It may or may not happen, but we’re not betting on it.

Alternative sources of liquidity are therefore top of mind — there’s a towering pile of private companies in need of an exit, or a bailout. Recent research from Cowboy Ventures’ Aileen Lee underscores how quickly illiquid wealth was accumulated in the private markets in the last decade, and how rare exits have become for unicorns and other richly valued startups.

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Lee found that the number of unicorns in the U.S. had increased 14 times over the past year, reaching 532 in 2013 from just 39 in 2013. However, the rate at which unicorns went public moved in the opposite direction — only 7% of unicorns today have found an exit, down from 66% of the initial cohort. Note that TechCrunch, like many publications, focuses only on private unicorns while Cowboy Ventures is also counting those that have gone public.

This puts startups in a difficult spot. But the good news is that some untraveled and overgrown exit paths have a chance of opening up this year. The bad news is that those avenues may offer prices far less than what many startups are willing to accept. Call it painful price discovery.

Let’s talk private equity, startups, and their possible marriage this year.

Why do bad tidings make for good news sometimes?

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