Tech IPOs 2024: Back from the Brink?

From Venture Capital to IPOs: A 2024 Reality Check

Compared to the past two years, which have been rough for the IPO market, 2024 has seen an uptick in interest in new IPOs as companies seek more growth beyond what private capital can provide. As such, companies take the leap from being privately owned to listing their shares on a public stock exchange, like the New York Stock Exchange (NYSE) or the Nasdaq.

The likes of Facebook and Amazon have gone down this route in the past, cementing their success and setting them up for a future of even higher revenue growth. However, growth is looking different in the present. As economic uncertainties still loom large, technology companies are aiming for sustainable growth.

IPO activity in the US in H1 2024 surprised everyone as it has vastly improved from recent years: Total proceeds have reached $16.7 billion, an 87.3% IPO price increase from 2023, and filing activity rose 21.6%. The success of recent IPOs, the expectation in public markets that the US Federal Reserve will cut interest rates by 25 points in the coming months and numerous companies stalling their exit in the past all point to an even more encouraging H2.

Moreover, there’s good news for startups. Private equity (PE) and venture capital (VC) backed companies have led the way in most IPO proceedings to date, going from 9% in H1 2023 to 41% in H1 2024. This growth was especially pronounced in the Americas, where 74% of proceedings came from PE and VC-backed companies.

However, the global IPO market is still in rough shape compared to pre-pandemic figures, economies are still facing hardships, and several upcoming elections worldwide are scheduled, meaning investors will continue to proceed with caution for the remainder of the year. Let’s see what’s ahead for the rest of 2024.

New Public Companies Making Waves in 2024

H1 2024 saw many unexpectedly successful tech companies make their exits, which momentarily increased hopes for more to come in H2. Let’s check out these exits and what prompted their unlikely success this year.

Reddit (RDDT)

Previous to the social media giant’s exit in March, the public company briefly hinted at an exit in 2021, which fizzled out. This decision proved advantageous as the company initially listed its stocks at $34 per share on the New York Stock Exchange with a $6.5 billion valuation. Its stocks suffered a quick tumble and subsequently rose by 63%, landing the public company at a current price of $55.62 as of the early stages of August.

This exponential revenue growth came after the company struck a deal with the startup OpenAI that involved Reddit implementing AI features in its platform while the AI maker uses their data to further train its model. Financial experts project the company to report $254.5 million in revenue last quarter — a 30% increase year-over-year — and $52.46 million in losses.

Astera Labs (ALAB)

Astera Labs, the AI and cloud infrastructure company, was one of the most prominent tech IPOs of the first half of the year, with a valuation of $5.5 billion and an opening share price of $36 back in March. Their stock has dramatically changed since, with predictions and valuations changing by the minute: Share price initially jumped over 35% and later fell 42%, prompting investment companies like Morgan Stanley to reduce their target price for common stock from $85 to $55.

The company’s initial hype revolved around naming relationships with Nvidia, Advanced Micro Devices and Intel in its IPO, which showed potential growth as the semiconductor industry continues to bounce back. So, despite the setbacks, experts are still expecting ALAB stocks to rise in hopes that it closes the trading year with the strongest new IPO.

Tempus AI (TEM.O)

Tempus AI is a healthtech company that runs genomic testing and provides de-identified health data to pharmaceutical companies. The company listed its IPO and went public in June with a $6.1 billion valuation and a starting price of $37 per share. As of a few days after its exit, Tempus AI made waves as its stock price jumped by 15%.

As of mid-June, the company had raised $410.7 million from its IPO, which isn’t surprising given the rise of healthtech startups and their potential in the IPO market this year.

The exit was led by Morgan Stanley — the company has been noticing a new normal for IPOs. “IPOs that Morgan Stanley has worked on this year show that the market has gotten more comfortable with paying for growth again. We’re not back to the levels of 2021, but we are getting a fair price for growth,” said Colin Stewart, Global Head of Technology Equity Capital Markets.

Tech IPOs Delayed: What to Expect for the Remainder of 2024

While H1 IPOs hinted at a more optimistic H2, many prominent tech companies seem to aim for exits in 2025 as economic uncertainties remain. In fact, TechCrunch recently reported it might be easier to tell which companies won’t be going the IPO route this year than those that will. The tech publication cited big names that had planned upcoming IPOs but later backtracked on their offerings under very specific circumstances, so let’s examine what those were:

Stripe

Although the fintech unicorn hinted at a stock market offering earlier this year, it later announced a secondary sale that valued it at $65 billion. With such figures and looking to climb back up to its $95 billion valuation in 2021, the company realized its ceiling is much higher. As such, making an exit isn’t on the horizon just yet — a major disappointment as one of the most expected tech IPOs this year.

Databricks

The AI cloud service had been chosen by many VC investors as one of the first exits for 2024. However, just last year the company had raised a Series I round at a valuation of $43 billion, with no announcements that it would offer a listing. Perhaps, Databricks is waiting for the market and technology sector to stabilize.

Figma

The design platform recently allowed investors and employees to sell their shares in the secondary market, which TechCrunch reports as a move a pre-IPO company usually doesn’t go for. While the company was an IPO hopeful this year, its actions speak otherwise.

Case Study: The Rise of Healthtech IPOs

Reddit and Astera Labs became the talk of the town for their successful yet unexpected IPOs which revived the tech stock market earlier this year. However, there’s an even more surprising matter to discuss. Healthtech IPOs this year were a pleasant surprise, especially as these companies’ stocks have held their ground in a still-volatile stock market.

From wearables to medical devices and SaaS services, healthtech has been flourishing by diversifying into new business sectors and markets that deliver major value to a vast pool of users. So, it’s no surprise that 2024 saw many healthtechs make the IPO cut. Besides Tempus AI’s impressive run so far, especially as it combines both healthcare and AI (very hot topics), there have been more healthcare-related IPOs to keep an eye on.

Prime Healthtech Examples

KindlyMD, a telemedicine and digital health company, announced its IPO listing in late May with an IPO price of $6.8 million from 1,240,910 units at a price of $5.50 (with a subsequent high of $4.2). The company provides 80% of Utah’s insurance coverage and recently reported positive insurance payor reimbursement rates, which went up 163.7%. It also partnered with Curaleaf and achieved other state-wide milestones post-IPO that set it up for big success for the rest of 2024 and beyond.

Moreover, healthtech companies like Waystar Holding, Latin American healthcare provider Auna and healthcare investment company Perceptive Capital Solutions successfully made their IPO debut this year. These examples and many more in the healthcare industry show that investors are willing to go big on health tech-related companies, setting the stage for more healthtech startups to confidently take the IPO leap in the coming months and years.

Tech IPO Outlook: 2024 and Beyond

The IPO hype for tech companies at the end of Q1 this year has certainly waned — but not without some positives. Investors and founders alike are realizing that 2021 is long gone, yet there’s a new ground to cover for well-positioned companies: growth.

As the 2025 IPO calendar looks to be more active than this year, founders looking to go public must focus on key takeaways like demonstrating profitability and potential for steady growth if they wish to succeed in the market. Investors are still moving with caution as interest rate cuts take full effect, but they’re still willing to invest in companies with high ceilings.

Are you investing in AI or developing it? Are you providing data for AI to keep growing? Is your healthtech making crucial partnerships to continue its expansion? These are some key questions investors will be asking from now on.

What’s sure is that 2025 will see more IPO activity as major companies like Stripe and Databricks grow their valuations and wait out market volatility. Late-stage companies should proceed with caution and check crucial boxes, like their involvement with AI, before they think of hinting at going public.

And, as with anything, these aren’t moves you should be making without involving your stakeholders, employees, and risk management experts who can lend their knowledge to weigh out the pros and cons.