Driven by public markets and tech IPOs, demand for private stocks is at its highest level since 2021

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Investors aren't just pouring money into public markets and initial public offerings — they're also buying up stocks in private companies at the fastest pace in years.

For the first time since November 2021, there are more investors looking to put their money into privately held companies than sellers offering shares for sale, according to a report from Forge Global, a secondary marketplace for private stocks.

The report, which includes data through February, suggests that excitement over Astera Labs and Reddit's IPOs — and a likely Rubrik IPO — has spilled over into the private market. Investors initially showed similar excitement last year with the IPOs of Klaviyo and Instacart, but this year it just happened differently, said Andrew Saeta, chief executive of Forge.

“It’s been a long time since big tech companies have considered going public,” Saeta said. “It cooled off a bit when those IPOs last year maybe weren't as great as people had hoped.”

Public vs. private

The private market includes companies that are privately held, meaning they are not registered with the Securities and Exchange Commission. A key difference between private and public companies is that private companies are not required to comply with SEC requirements for disclosing corporate information. This is partly why investments are limited to funds such as venture capital or private equity, or to individuals earning at least $200,000 per year.

The Forge Private Market Index, which according to the company's website “reflects the current performance and pricing activity of venture capital-backed, actively traded late-stage companies,” is up 4% in 2024, which doesn't sound like a lot when you think about it consider that it fell by more than 20% in 2023 – after more than doubling in 2022.

At least some of the recent increases are due to increasing interest in artificial intelligence, Saeta said. According to the Organization for Economic Cooperation and Development, VC funding for the sector has increased from $3 billion in 2012 to around $75 billion in 2020.

“AI has so many applications,” he added. “You can argue that this company is AI-adjacent or that this company is AI-adjacent, and so a lot of companies are choosing to add a key AI component, whether it's adding your dot AI to your website address or actually something More meaningful. ”

In general, sellers' indications of interest (IOI) remained stable in February and buyers' IOI increased, with differences observed across different sectors. Without giving specific numbers, the report noted that a large portion of venture capital flowed to AI-related companies.

“The private market has historically performed more slowly than public equity markets, both up and down, so the strength of public markets may also lead to better prospects for private companies after a lag period,” the report said. which was written by Craig Derbenwick, Senior Director of Content Strategy at Forge.