Phil Haslett, co-founder and Chief Strategy officer at EquityZen, believes that the ongoing bank crisis could be a catalyst for the initial public offering (IPO) market in 2023.
So this may be a bit of a stretch, but Haslett sees the collapse of Silicon Valley Bank as removing a very popular funding option for private firms. As capital is not as available, a public offering may rise as a viable alternative. At one time SVB was the largest financial institution in the VC market focusing on it exclusively.
At the same time, it has been widely reported that venture funding has been sidelined as big money waits for the dust to settle.
Haslett explains that there are over 1200 Unicorn companies with valuations over $1 billion. Many of these firms had plans to go public before the economy cratered. He predicts that most companies will wait until late Q3 or early Q4 to see what the market looks like and see if it’s a better environment to go public.
“Given the market, a private company may not be eager to dip their toe in the water, but maybe they will accept that they can raise capital in the private markets, but it’s going to be at a down round versus where they last raised. Another consideration that these companies really need to think about is the liquidity needs. So not only do they have capital needs, but they have early employees and shareholders who need liquidity or may have options expiring, so that just adds pressure on all of these exit paths.”
Haslett claims that once there is one successful IPO – there will be more.
The caveat to all of this is there are a lot of macro factors, such as uncertainty with rate hikes and inflation. While not great for public markets, they are not many other options.
“Your options are to IPO or raise a primary round in the private markets, which is increasingly difficult.”
Haslett did not comment on online capital formation or securities crowdfunding.
Haslett noted once again that EquityZen is seeing a 40% haircut for private company valuations providing an interesting opportunity for investors.