Investors aren’t just pouring money into public markets and IPOs—they’re buying up shares of private companies at the fastest rate in years.
For the first time since November 2021, there are more investors looking to put their money into privately held companies than sellers putting up shares for sale, according to a report by Forge Global, a secondary marketplace for private shares.
The report, which includes data through February, indicates that excitement over IPOs by Astera Labs and Reddit—and a likely IPO by Rubrik—has spilled into the private market. Investors initially exhibited similar excitement last year with IPOs by Klaviyo and Instacart but this year it just hit differently, said Andrew Saeta, managing director at Forge.
“It had been a long time since large tech companies thought about going public,” Saeta said. “It kind of cooled off when those IPOs were maybe not as awesome as people were hoping” last year.
Public vs. Private
The private market covers privately owned companies, which means they’re not registered with the Securities and Exchange Commission. A key distinction between private and public companies is that private firms don’t have to meet SEC requirements on divulging company information. It’s partly why investments are limited to funds like venture capital or private equity, or individuals earning at at least $200,000 a year.
The Forge Private Market Index, which according to the firm’s website “reflects the up-to-date performance and pricing activity of venture-backed, late-stage companies that are actively traded,” is up 4% in 2024, which doesn’t sound like much until you consider that in 2023 it fell by more than 20%—after more than doubling in 2022.
At least some of the recent gains are attributable to rising interest in artificial intelligence, Saeta said. According to the Organization for Economic Cooperation and Development, VC funding for the sector has increased from $3 billion in 2012 to around $75 billion by 2020.
“AI has so many applications,” he added. “You can make the case that this company is AI adjacent or that company is AI adjacent, and so a lot of companies pivot to have a major AI component, whether that’s adding your dot AI to your website address or actually doing something more meaningful.”
Generally speaking, February saw sellers’ indications of interest (IOI) hold steady and an increase of buyers’ IOI, with variations seen in different sectors. Without citing specific figures, the report noted that a large portion of venture capital went to AI-related enterprises.
“The private market has historically moved more slowly than public equity markets on both the upside and downside, so strength in the public markets has the potential to translate into better prospects for private companies as well after a lag period,” stated the report, authored by Craig Derbenwick, senior director of content strategy at Forge.