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Investment firms are raising billions of dollars to buy stakes in venture capital-backed technology start-ups, as a long drought in acquisitions and initial public offerings forces early investors to offload their stock at discounts.
The start-up secondary market, where investors and employees buy and sell tens of billions of dollars’ worth of shares in privately held companies, is becoming an increasingly important trading venue, in the absence of traditional ways of cashing out and given a slowdown in start-up funding.
Venture secondaries buyers are primed for a busy year as start-up employees look for a way to sell their stock and investors look to
Forge Global, a publicly traded secondary exchange for privately held stock, reported a more than 50 per cent quarter-on-quarter increase in trading volumes in the third quarter of 2023, and chief executive Kelly Rodriques told the Financial Times “that trend will continue”.
On average, recent share sales on Forge were priced at about a 50 per cent discount to each company’s most recent primary fundraising.
InvestX’s New said those willing to brave the market before the broader IPO market recovers could pick up bargains.
“We’ve been successful in putting in low-priced bids [where] we’re the only person in the market,” he said. “I think the next few months will be the best time to be a buyer of these types of securities in the past half decade.”