Pre-IPO rounds revive late-stage funding

There was an improvement in both the number and average ticket size of Series D stage and above deals in 2024 versus the year before

- Priyamvada C

The year 2024 has seen a revival in late-stage funding compared to earlier stages, paving the way for several large pre-initial public offering (IPO) rounds. The trend is likely to continue in the near term as more marquee companies prepare to go public. Meanwhile, even mid-market deals saw a reasonable rise in the past 12 months, while seed- and early-stage deals stuttered.

According to data from market intelligence provider Tracxn, there were 83 rounds at the Series D stage and above with an average ticket size of $74.4 million this year, surpassing 73 deals with $71 million in 2023. However, it fell short of 2022 levels where there were 137 rounds with an average deal size of $89.5 million.

"Given the complicated cap tables, the need to return capital to LPs and companies trying to manage selling pressure once they are listed, companies are pushing for pre-IPO rounds to enable secondary transactions," said Pankaj Naik, managing director and co-head for digital and technology investment banking at Avendus Capital. LPs, or limited partners, are entities or individuals that invest in venture capital and private equity funds.

"We are seeing a return of frantic deal activity. We are anticipating volumes to go up," he said, adding that newer pools of capital such as HNIs (high-net-worth individuals) are providing another alternative to crossover investors for high-quality companies. A cross-over investor is someone who is invested through the pre-IPO stage till after the IPO.

Most transactions this year included a secondary swap of shares. Looking ahead, too, the Indian private markets appear ripe for secondary transactions with several new-age startups like OfBusiness, Infra market, Purplle, PhonePe, Bluestone, PayU and Meesho expected to go public in the next two to three years.