A Traffic Jam of $1 Trillion: The Venture Capital Market’s Backlog
Imagine a traffic jam where every car is worth a billion dollars of illiquid capital. Now, imagine that there are 1,000 cars in that traffic jam, and realize that the 1,000 billion-dollar cars in front of you are only part of the issue.
The U.S. Exit Backlog: A $1 Trillion Problem
A recent data analysis by PitchBook indicates that the value of the most mature startups in the United States that need to find an exit neared the $1 trillion mark through Q3 2023. This figure underscores how weak the exit climate has been over the last two years and highlights the sheer mass of illiquid equity investments made into startups that call the United States home.
The Exchange
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday. The U.S.’s exit backlog is merely a part of the larger whole. PitchBook defines the "venture growth" fundraising bracket as "any financing that is Series E or later or any VC financing of a company that is at least 7 years old and has raised at least $50 million."
The Global Backlog
Globally, the backlog is even longer, and we haven’t even included the merely late-stage startups that have to exit. The 2024 IPO market matters so much because there’s a continent-sized glacier of money frozen in startups today, and with the pressure ticking higher every day for it to melt and become liquid cash, something is bound to break.
Why the 2024 IPO Market Matters
There are several reasons why the 2024 IPO market matters:
- IPO Activity: The IPO market has been slow, with only $28.2 billion worth of IPOs in 2023, compared to $157.6 billion in 2021.
- Exit Velocity: It would take more than three times the exit activity we saw in 2021 to clear only the SaaS backlog, provided no new super-late-stage SaaS companies are added to the list.
- Global Impact: The global backlog is even longer, and we haven’t even included the merely late-stage startups that have to exit.
What Could Unlock the IPO Market?
It’s not clear what could unlock the IPO market to a point where a material portion of late-stage startup equity in the United States could find a way out. However, something is bound to break, and with the pressure ticking higher every day, it’s likely that we’ll see a significant increase in IPO activity in 2024.
Conclusion
The venture capital market’s backlog is a pressing issue that needs attention. With $1 trillion worth of illiquid equity investments stuck in startups, it’s essential to find ways to unlock the IPO market and allow these companies to exit. The 2024 IPO market matters so much because it has the potential to break this traffic jam and allow the money frozen in startups to become liquid cash.
Related Topics
- EC Market Analysis
- EC Venture Capital
- PitchBook
- Startup Exits
- Startups
- The Exchange
- Venture
About the Author
Alex Wilhelm is a senior reporter for TechCrunch covering the markets, venture capital and startups. He was also the founding host of TechCrunch’s Webby Award-winning podcast Equity.
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