| By Jessica Mathews Welcome to 2024, and to a very special edition of Term Sheet. In a longstanding tradition for this newsletter, we ask readers to weigh in on what the coming year will bring for the private markets. This year, I’ve received an unprecedented number of responses—more than 170 predictions. So we’ve decided to allocate the whole first week of January to the Crystal Ball (yay!). To kick things off, we’re going to take an overarching look at the private markets. Will private funds consolidate this year? When will the IPO markets reopen? And how many unicorns will go extinct? Then later in the week we’ll zero in on specific sectors such as AI, crypto, cybersecurity, and more. Enough from me: Here’s what you had to say. Note: Many answers have been shortened for clarity and/or brevity. The deals section will be back next week! Term Sheet readers weigh in on what the coming year will bring for the private markets.Photo illustration by Victoria Ellis; Original photos by Getty Images Venture capital market + startup funding: Mass extinction There will be a mass extinction event for startups, as two-thirds of startups have less than a year’s worth of runway. This will be a major reset for the industry, and result in a continued flood of available talent for the next wave of companies to be created. —Jack Abraham, managing partner and CEO, Atomic 2024 will be when the power balance shifts back to LPs. I expect that we’ll see managers across the VC stage spectrum retrenching their fundraising strategy and lowering their expectations by raising the same size—or smaller—funds than their predecessors. —Sarah Tomolonius, partner, M13 There will be more SBFs, Michael Rothenbergs, Charlie Javices, and other frauds that are unearthed, which ultimately will be good for the system. More shoes are going to drop, including WeWork CEO types who were “legal” but who nevertheless exploited the greed era for personal profit. —Logan Henderson, CEO and cofounder, Gridline VC investment into startups will fall below the $100B level for the first time since 2017. —Jeffrey Grabow, U.S. venture capital leader, Ernst & Young Tech unicorns that have not adapted their financial models to the new rate environment will begin to run out of capital and fail; this group contributes to a significant portion of the U.S. GDP, so failures will create powerful ripple effects felt throughout the market. —Raphaëlle d’Ornano, founder and managing partner, D’Ornano + Co. Generational transfers of leadership within family offices will spur greater interest in venture capital strategies. Millennials who came to age with the rise of tech will diversify holdings into long-term private investments in sectors of interest to their generation’s lived experiences (e.g., climate, defense, healthcare, family care, infrastructure). —Madeline Darcy, founder and managing partner, Kaya Ventures In 2024, the Series A market is going to pick back up dramatically. —Rex Salisbury, founder and general partner, Cambrian Ventures The VC market will be a mixed bag in 2024. Among existing investments, we believe there will be an increase in ‘down rounds,’ meaning valuations will decrease across financings. —Theresa Hajer, head of U.S. venture capital research, Cambridge Associates I believe 2024 will go on to be one of the best venture deployment vintages ever, particularly at the early stage. —Rob Biederman, managing partner, Asymmetric The tougher fundraising environment for VCs will be felt over the next two years when a lot of these VCs will need to raise their next generation of funds. If some funds do not manage to raise a follow-up fund in the next several years, this will open up more discussions of mergers and acquisitions in the industry, which I think will happen. We are already hearing of quite a few funds that are struggling or have stopped fundraising altogether. —Oliver Holle, CEO and managing partner, Speedinvest Against the backdrop of ample dry powder, the best companies will have no problem attracting capital at premium valuations. Talent will migrate from “unicorpses” to the next generation of startups. —Merritt Hummer, partner, Bain Capital Ventures We’ve reached the bottom in valuation, and we’ll see an upswing now that the terminal rate has been achieved. However, the substantial supply of companies coming to market may still make it a buyer’s market. —Brad Bernstein, managing partner, FTV Capital Private equity market: Fundraising lull The 90/10 rule will continue with another challenging year for PE fundraising in 2024, extending longer than initially expected. —Fraser van Rensburg, cofounder and managing partner, Asante Capital Exit multiples will have a barbell distribution as buyers continue to flock to top-quality assets. —James Beach, partner, Morrison & Foerster There will likely be two key areas of focus for private equity managers—capital to support bolt-on acquisitions as longer hold periods continue and reassessing portfolio company capital structures given macro challenges, higher debt costs, and upcoming debt maturities. —Stephen Quinn, managing director, 17Capital Best-in-class private equity managers will implement NAV loans in an increasingly transparent manner to create value for investors by funding further add-ons and supporting growth initiatives at underlying portfolio companies. —Stephen Swentzel, managing director and cohead of GP financing solutions, Hunter Point Capital The need for deleveraging will be perhaps the most defining characteristic of middle market private equity investing as we begin this new cycle in 2024. —Erol Uzumeri, founding partner, Searchlight Capital IPOs and Take-privates: The dual track The public markets will see more ‘take privates’ in 2024 as CEOs begin to make decisions about their stock prices and weigh the time needed to create value in public markets versus private markets. Debt will be cheaper and the private markets will become more attractive to a number of public company CEOs. —Dan Lynn, partner, Lead Edge Capital I expect a few hearty companies with significant scale will brave the public markets before Memorial Day…perhaps paving the way for other slightly smaller offerings following suit as a means to seek liquidity for their employees/investors…particularly if the stodgy FTC M&A approval process of late persists. —Kirsten Morin, partner, HighVista Strategies 2024 will mark the emergence of green shoots for venture-backed IPOs, which will then lead to a deluge in 2025. With the increase in venture capital funding and the rise of innovative business models, the IPO market is expected to experience a surge in activity, resulting in a wave of new public offerings in 2025. —Pradeep Tagare, head of investments, National Grid Partners Companies will run “dual tracks” during their IPOs and show preference towards the M&A route, as many evaluate exits and the potential unsteadiness of a non-ZIRP equity market. —Ambar Bhattacharyya, managing director, Maverick Ventures M&A: On the up and up Disney sells an 80% controlling stake of ESPN—not to a Netflix or Amazon-like strategic, but to a 2007-esque Club Deal of mega-cap private equity funds. —Jeff Collins, managing partner, Cloverlay M&A will not be a viable exit. With a new wave of right-sizing potentially on the horizon for some incumbents, the buyer pool is getting smaller and smaller as, optically, it will be hard to justify an M&A transaction while letting go of great people at this point. —Simon Wu, partner, Cathay Innovation The acquisition market may recover before the IPO market, driven by the limited patience of acquirers reliant on startup innovation. —Tasneem Dohadwala, founding partner, Excelestar Ventures All the chatter about the demise of M&A is overblown. We saw a steady and ‘stable’ 2023 and we expect to see a steady flow of deals in 2024, perhaps with fewer megadeals, and less of the craziness we saw in 2021. —Scott Miller, cochair, Sullivan & Cromwell Consolidation will be a big theme in 2024. There are a number of competitive categories where there are too many vendors and many will join forces in 2024 or find strategic homes. Too many Unicorns, not enough homes. —Avery Rosin, partner, Lead Edge Capital I expect under current conditions that the deal environment will remain depressed well into 2024. Despite substantial interest in transacting, sponsors and strategics are facing headwinds to closing deals or raising money. Frankly, I think 2024 will feel a bit like the 2003–4 recovery following the dotcom bubble. —Jason Greenberg, cohead of tech, media and telecom investment banking, Jefferies Etc.: Bring back the cargo pants The cargo pants of the 1990s will return! —Tomasz Tunguz, founder, Theory Ventures I’m looking forward to good news meaningfully outnumbering bad news for the first time in a while. In 2019 and earlier, you’d have a four-to-one ratio of good news to bad. For most of the past seven quarters, it’s been the opposite, if not worse. —Ryan Hinkle, managing director, Insight Partners |
