Cartoon: Feeling the weight
“Feeling the weight” by Iantoons
This new cartoon illustrates how the cohort of start-ups that enjoyed high valuations in the last bull cycle are now finding it hard to get acquired.
With the second year of decline in IPOs from the highs of 2021, most start-ups are dependent on a merger or acquisition for an exit. However, data from Dealogic shows that venture-backed start-ups saw a 19% drop in the number of M&A transactions over 2023.
One of the main reasons for these continued declines is that seller expectations remain stubbornly high. The boards of start-ups are reluctant to accept that they are not going to grow into the sky-high valuations of 2021. This is despite the precipitous drop in valuation of vested employee stock in the secondary market.
In the summer, Tom Callahan, CEO of Nasdaq Private Market, said: “What we’ve heard from some investors [is] that buying private secondaries in 2023 is like buying real estate in 2009.”
It seems that the boards at these start-ups need to go through the five stages of grief before their valuations can get to a realistic expectation for potential buyers.
You can find more of Ian Foley’s cartoons here.
