2024: Year of the IPOs?
2023 saw very few major tech IPOs apart from a few notable examples such as Instacart and Klaviyo. Yet Florida Funders partner Saxon Baum notes that a robust IPO market in 2024 will provide the much-needed liquidity to fully defrost the startup ecosystem.
“It’s a pure trickle-down effect,” he explained. “We’re not going to see any movement until the IPO market opens up,” since startups going public enables investors to recuperate their investment and redeploy the funds.
“If not, we’re in for a longer ride because LPs will be hesitant to write checks because they don’t have liquidity,” Baum said.
Baum clarified the narrative around LPs having lots of so-called dry powder is a bit overblown. “It’s not like the funds are sitting on capital – that’s not the case.” Rather, the VCs have raised the funds in the form of commitments from LPs without actually receiving the cash until capital calls, which happen over a three to five year period.
Advice for startups looking to raise right now
“The days of raising money on an idea – unless you’re a successful serial founder – are long gone,” asserted Baum. “Instead of trying to fundraise, try to get some traction.”
He explained that this can come in a wide variety of forms: partnerships, LOIs, revenue, “anything to show there’s some meat on the bone when it comes to your business.”
“We are advising all of our companies to shift towards profitability,” Baumgarten said – a different mentality than the ‘growth at all costs’ concept that permeated startup culture over the last few years. Of course, Baumgarten makes it clear that startups need not eschew growth completely: “When a company has a higher growth rate, they are able to drive higher valuations.”
But ultimately, a focus on the fundamentals is always a safe bet. “If you have fundamental economics that are sustainable, there’s no shortage of investors that will want to invest in you,” shared Baumgarten.
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