Tech startups and VC turning to PE for liquidity

Fri, 11/15/2024

by Ellie LeTu

Source: WSJ

• Liquidity becoming an issue for VC and startups

  • IPOs and M&A have historically been the primary ways to exit investments in tech and VC.

    • Both methods have been down recently, with the IPO market struggling and the US government cracking down on M&A.

  • Investors are still demanding returns from VC firms and startups.

• The solution? Enter private equity

  • Tech represented 28.3% of total PE deal value in Q3.

    • Up from 18.7% of total PE deal value in Q2.

  • PE’s interest in tech has been well known for years.

    • Prioritizing companies they believe can go public in two to five years.

  • Notable acquisitions this year.

    • KKR acquiring education tech company Instructure Holdings ($4.8B).

    • Bain acquiring financial tech company Envestment ($4.5 B).

• The future looks brighter for tech startups

  • IPO market is slowly bouncing back.

    • IPOs in 2024 have already outpaced 2023.

  • M&A looks to return in force with a Trump presidency.

  • Tech founders still prefer exiting through IPOs and M&A.

    • Seen as the best option for a company’s future.