Global venture capital seems in tough shape at the moment, with a lot of capital deployed over the last decade relative to the number of liquidity events. It seems like it is a tough time for venture capital financing and perhaps a tough time for the venture capital firms and their growth equity investments, but there appears to be a window that is opening up for liquidity events at the moment and it may be time to put more focus on your company exit strategy.
My overarching sense is that:
- Organic growth in the product markets, particularly growth from new customer acquisition, is very difficult in most sectors
- In the capital markets, there appears to be a (secular?) trend back from safer asset classes to riskier asset classes, thereby giving fresh cash to growth equity money managers
- Valuations appear very healthy in the public capital markets, including (particularly?) growth equity
The net effect of an environment like this is that it should be good for both acquisition activity and for IPO activity:
- The low organic growth and healthy valuations makes acquisition based growth more attractive in the buy vs. build analysis of the larger companies
- The combination of healthy valuations and fresh cash in the hands of money managers makes for solid IPO opportunities
I don’t spend a lot of time deeply analyzing market data, but the number of successful tech IPOs seems to be up over the last several months and the number of acquisition announcements in tech (at healthy prices) seems to be up as well.
If the state of the current environment stays relatively constant, this may shape up to be a relatively good period for exits and perhaps a good time your company to put more focus against executing your company exit strategy (or developing your company exit strategy in the first place).