I caught up with a venture capital investor this week. We chatted about 2023 and what venture capital might look like in 2024. He follows the public markets and was glad to see them finish 2023 on a high note. But he wasn’t sure about venture capital in 2024. He noted that while public markets were positive in 2023, especially the last few months, the IPO market was sluggish. And the few technology companies that did go public were bellwethers and didn’t perform well. Public-market investor sentiment about newly listed technology companies wasn’t great in 2023, which turned off venture investors and founders from taking more companies public. Until this shows signs of changing, he isn’t optimistic about the venture capital industry.

I think public-market investors are reassessing how to value technology companies, which is slowing the IPO market. The revenue-multiple approach is resonating less with them because of interest-rate hikes over the last two years. But legacy valuation methods such as price-to-earnings multiples don’t always make sense for technology companies either, given their ability to reinvest in growth. When public-market investors settle on a valuation approach and venture capitalists and founders embrace it, I think we’ll see more IPOs received positively by public-market investors and, in turn, more companies going public.

Who knows when that will happen—but it wouldn’t surprise me if 2024 is the year a new valuation approach is embraced by public market investors, venture capitalists, and founders.