The venture secondary market has evolved significantly, moving beyond traditional discount sales to offer a wide range of opportunities. Today, investors can secure shares for top-tier companies without discounts and even sell them at a premium. Our latest report explores these trends through cases.

In the first half of 2024, primary fundraising rounds for late stage companies and IPOs in general were notably scarce, leaving analysts with limited insights into investor sentiment on valuations. However, the secondary market has emerged as a crucial barometer, providing a unique glimpse into market’s confidence through implied valuations and the Launchbay Index.

Our report for the first half of 2024 analyzes how the secondary market responded to major primary rounds, anticipates the impact of upcoming IPOs from a secondary market perspective, and assesses these dynamics using the Launchbay Index. This index sheds light on how secondary market participants value leading liquidity-driven companies on the Launchbay platform.

All secondary implied valuations and liquidity metrics discussed in this report are derived from the Launchbay pricing tool and the Launchbay liquidity score, offering a comprehensive view of current market conditions.

Main Takeaways:

Diverse Secondary Investor Interest: The venture secondary market witnessed robust activity driven by a diverse mix of both traditional pre-IPO expectants and emerging stars in the generative AI sector. Our analysis of liquidity highlights a balanced portfolio featuring significant investments in AI alongside non-AI enterprises.

Underinvested Venture Secondary Market: Despite occasional opportunities to acquire secondaries at discounts relative to last primary rounds, the market dynamics are evolving. At times, secondary prices surpass primary valuations, signalling a shift in investment strategies towards more diversified approaches.

Strength in Secondary Prices: Companies that conducted primary rounds in the first half of 2024 experienced lower secondary discounts compared to market averages, indicating strengthened pricing resilience.

AI Investment Trends: During the same period, secondary market prices for AI-focused companies often mirrored primary round valuations, offering investors opportunities without the traditional discounts associated with secondary transactions.

Investor Sensitivity to Primary Round Speculation: AI companies emerged as pivotal price influencers in the first half of 2024, underscoring secondary investors' heightened responsiveness to news and rumours surrounding upcoming primary rounds, particularly within the AI sector.

Launchbay Index Surge: The Launchbay Index recorded a notable upswing driven by heightened implied valuations of leading firms across multiple sectors, reflecting broader market optimism and investment appetite.

Tech Private Companies with Highest Liquidity on the Secondary Market

In the first half of 2024, we refined our liquidity scoring methodology to provide a comprehensive view of market dynamics on the Launchbay platform. Each company listed now receives a liquidity score based on a range of metrics, including trading volume, number of offers, and bid share. Here are the tech private companies that topped our liquidity rankings:

Most significant primary rounds of 1H2024 for top-liquidity companies

New primary rounds significantly influence secondary market prices, serving as essential benchmarks for evaluating secondary investment strategies. Let's delve into how secondary investors appraise private tech companies in light of recent primary rounds.
Pre-Primary Round Discounts: In 4 out of 5 cases involving non-AI companies, secondary investors had the opportunity to purchase shares at a discount before primary rounds. Notably, Ramp was an outlier, with secondary prices aligning with primary levels prior to the round.
Post-Primary Round Pricing: Following primary rounds, only 3 out of 5 companies were listed on the secondary market at discounted prices. Ramp and Versel experienced price increases post-round, indicating strong investor confidence and demand. Meanwhile, other companies saw diminishing discounts:

Epic Games: Now listed with a 17% discount compared to its last primary round.
Rippling: Listed with up to 10% discount, reflecting a slight narrowing in price disparity.
Monzo: up to 20% discount compared to its last primary round

AI primary rounds

Scale were not traded at a discount before their rounds, yet secondary investors still profited from the up round. This trend was also evident in other AI-focused companies such as Anthropic, Lambda, Perplexity, and CoreWeave. These firms saw secondary market prices on par with, or even exceeding, primary round valuations.

Opportunities in the AI Sector: The secondary market offers a crucial entry point for investors who missed out on highly exclusive primary rounds within the AI sector. The ability to participate in the growth of these companies, even at secondary market prices, presents a valuable opportunity for investors seeking exposure to cutting-edge technologies and innovations.

Expected IPOs

The first half of 2024 saw a limited number of tech IPOs. However, those that did take place, including Reddit, Astera Labs, and Rubrik, proved to be successful. These IPOs delivered positive returns for after-2021-secondary-investors and exhibited strong post-IPO performance.

Looking ahead, Morgan Stanley anticipates that 10 to 15 more tech companies will go public before the end of 2024. Here is a review of potential IPO candidates, including companies that have announced or filed for IPO:

Launchbay Index Insights: Rising Valuations and Market Drivers

The Launchbay Index reveals a significant rise in the valuations of top-liquidity companies. This increase is driven by a diverse array of sectors, reflecting the broad-based strength and investor confidence in the market.

Key Drivers of Valuation Increases:
AI: Cerebras, Scale
SpaceTech: SpaceX
Crypto: Kraken
Gaming: Epic Game
B2C SaaS: Notion, Figma
Fintech: Klarna, Revolut, Stripe, Ramp
Vertical SaaS, and Data&MLOps sectors remain almost flat.

Launchbay Index:
AI: Anthropic, OpenAI, Scale, Cerebras
Fintech: Klarna, Revolut, Stripe, Monzo, Ramp
B2C SaaS: Figma, Notion, Canva
Vertical SaaS: Deel, Navan, Rippling, ServiceTitan, Gusto
Gaming: Epic Games, Discord
SpaceTech: SpaceX
HealthTech: Aledade, Neuralink
Crypto: Kraken
Cyber: Arctic Wolf
Data and MLops: Databricks

Investor’s sensitivity

AI companies emerged as pivotal price influencers in the first half of 2024, underscoring secondary investors' heightened responsiveness to news and rumours surrounding upcoming primary rounds, particularly within the AI sector.

Cerebras: anticipation of IPO
Groq: rumors about the primary round