The primary fundraising environment remains challenging, though the recent IPOs have perhaps spurred some renewal and activity.
Coming off the low in Q1 2023, where the aggregate money raised and total number of deals in the period hit five-year lows, Q2 and Q3 were both modestly better. But the nature of funding is changing. Down in flat rounds as a share of all rounds are increasing. Additionally, as a new chart in the Forge Investment Outlook shows, investors are also able to demand and receive better terms and stronger protections that were far less common in previous years.
This chart shows the percentage of rounds with liquidation preference multiples greater than one. So we're talking about, in an exit event, investors that will receive a multiple of their initial investment before common shareholders receive any payout. So, what we see here is that in 2020 and 2021, the percentage of rounds with liquidation preferences were very low. 0.6% and 0.3% of primary funding rounds had multiples greater than one.
In 2022, this number rose to 1.3, which was higher, but similar to 2019. But in 2023 so far, this has grown to 5.9% of all new rounds, nearly four times higher than in 2019, the highest of the previous four years. What is also interesting is that we're seeing this on both up and down rounds. So, some investors are willing to pay a higher price for new company shares, but are requiring a liquidation preference multiple for doing so.
If we often think of up rounds as a measure of a positive fundraise, this chart caveats that a little, showing that recently, even some up rounds have characteristics reflecting a weaker company bargaining position and a stronger investor. Perhaps some of these up rounds are not quite as glowingly positive as we might otherwise think.
Disclaimers
About Forge
Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants.
Legal Notices and Disclosures
© 2024 Forge Global, Inc. and its affiliates. All rights reserved. Investing in private company securities is not suitable for all investors, is highly speculative, is high risk, and you should be prepared to withstand a total loss of your investment. Private company securities are highly illiquid and there is no guarantee that a market will develop for such securities. Each investment carries its own risks, and you should conduct your own due diligence regarding the investment, including obtaining independent professional advice.
Past performance Is not indicative of future results.
This is not a recommendation, offer, solicitation of an offer, or advice to buy or sell securities by Forge Securities LLC (“FSEC”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where FSEC is not permitted. Registered representatives of FSEC do not (1) advise any party on the merits of a particular transaction; (2) assist in the determination of fair value of any security; or (3) provide legal, tax, or transactional advisory services. Securities and investments are offered to customers of FSEC, member FINRA & SIPC. See Forge’s Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures.
The information contained herein is based on currently available information, and Forge undertakes no obligation to update any of such information or to reflect new information or the occurrence of unanticipated events, except as required by law. While Forge believes such information forms a reasonable basis for the contents of this Investment Outlook, such information may be limited or incomplete, and this content should not be read to indicate that Forge has conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
This Investment Outlook contains trademarks, service marks, trade names and copyrights of Forge and may contain those of other companies, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products is not intended to, and does not imply, a relationship with Forge or any of its respective affiliates, or an endorsement or sponsorship by or of Forge or such affiliates. Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this Investment Outlook may be listed without the TM, SM, (c) or (R) symbols, but Forge will assert, to the fullest extent under applicable law, the right of the applicable owners, if any, to these trademarks, service marks, trade names and copyrights.
The performance of the Forge Private Market Index with respect to the growth of $10,000 shown herein does not represent the performance of any actual investment, as you cannot invest in the index, but rather reflects the hypothetical growth of a $10,000 investment in a basket of securities based on the index. Additionally, the chart assumes reinvestment of dividends and capital gains in the constituent securities but does not reflect any fees or commissions that may be incurred in purchasing or selling such securities, which would lower the figures shown if included. Further, $10,000 may not be a sufficient amount to invest simultaneously in all securities contributing to the performance shown, which would further prevent an investor from matching the performance shown. The performance shown represents past performance, and past performance is not indicative of future results.
The Forge Private Market Index is calculated and disseminated by Forge Data LLC ("Forge Data") and is a mark of Forge Data. The Forge Private Market Index is solely for informational purposes and is based upon information from sources believed to be reliable. It is not possible to invest in the Forge Private Market Index, and Forge Data makes no assurance that any investment products based on or underlying the Forge Private Market Index will accurately track index performance or provide positive investment returns. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset classes or investment vehicles. Private company securities are highly illiquid, and the Forge Private Market Index may rely on a very limited number of trade and/or indication of interest inputs in its calculation. Please see Forge Private Market Index Disclaimers & Acknowledgments for other important disclaimers, disclosures and restrictions related to the Forge Private Market Index that you acknowledge by downloading this content and to which you are subject. References to "Returns" in the context of the Forge Private Market Index Price are hypothetical in nature. The percentages displayed indicate the per-share change in percentage in the Forge Private Market Index Price of the applicable constituent, rounded to the nearest tenth of a percent unless otherwise indicated.
Disclaimers
About Forge
Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants.
Legal Notices and Disclosures
© 2024 Forge Global, Inc. and its affiliates. All rights reserved. Investing in private company securities is not suitable for all investors, is highly speculative, is high risk, and you should be prepared to withstand a total loss of your investment. Private company securities are highly illiquid and there is no guarantee that a market will develop for such securities. Each investment carries its own risks, and you should conduct your own due diligence regarding the investment, including obtaining independent professional advice.
Past performance Is not indicative of future results.
This is not a recommendation, offer, solicitation of an offer, or advice to buy or sell securities by Forge Securities LLC (“FSEC”) or any of its affiliates, nor an offer of brokerage services in any jurisdiction where FSEC is not permitted. Registered representatives of FSEC do not (1) advise any party on the merits of a particular transaction; (2) assist in the determination of fair value of any security; or (3) provide legal, tax, or transactional advisory services. Securities and investments are offered to customers of FSEC, member FINRA & SIPC. See Forge’s Disclosure Library (Disclaimers & Disclosures and Form CRS) for additional disclosures.
The information contained herein is based on currently available information, and Forge undertakes no obligation to update any of such information or to reflect new information or the occurrence of unanticipated events, except as required by law. While Forge believes such information forms a reasonable basis for the contents of this Investment Outlook, such information may be limited or incomplete, and this content should not be read to indicate that Forge has conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
This Investment Outlook contains trademarks, service marks, trade names and copyrights of Forge and may contain those of other companies, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products is not intended to, and does not imply, a relationship with Forge or any of its respective affiliates, or an endorsement or sponsorship by or of Forge or such affiliates. Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this Investment Outlook may be listed without the TM, SM, (c) or (R) symbols, but Forge will assert, to the fullest extent under applicable law, the right of the applicable owners, if any, to these trademarks, service marks, trade names and copyrights.
The performance of the Forge Private Market Index with respect to the growth of $10,000 shown herein does not represent the performance of any actual investment, as you cannot invest in the index, but rather reflects the hypothetical growth of a $10,000 investment in a basket of securities based on the index. Additionally, the chart assumes reinvestment of dividends and capital gains in the constituent securities but does not reflect any fees or commissions that may be incurred in purchasing or selling such securities, which would lower the figures shown if included. Further, $10,000 may not be a sufficient amount to invest simultaneously in all securities contributing to the performance shown, which would further prevent an investor from matching the performance shown. The performance shown represents past performance, and past performance is not indicative of future results.
The Forge Private Market Index is calculated and disseminated by Forge Data LLC ("Forge Data") and is a mark of Forge Data. The Forge Private Market Index is solely for informational purposes and is based upon information from sources believed to be reliable. It is not possible to invest in the Forge Private Market Index, and Forge Data makes no assurance that any investment products based on or underlying the Forge Private Market Index will accurately track index performance or provide positive investment returns. Forge Data is not an investment adviser and makes no representation regarding the advisability of investing in any asset classes or investment vehicles. Private company securities are highly illiquid, and the Forge Private Market Index may rely on a very limited number of trade and/or indication of interest inputs in its calculation. Please see Forge Private Market Index Disclaimers & Acknowledgments for other important disclaimers, disclosures and restrictions related to the Forge Private Market Index that you acknowledge by downloading this content and to which you are subject. References to "Returns" in the context of the Forge Private Market Index Price are hypothetical in nature. The percentages displayed indicate the per-share change in percentage in the Forge Private Market Index Price of the applicable constituent, rounded to the nearest tenth of a percent unless otherwise indicated.