GPs seek alternatives in absence of US IPOs – AVCJ Forum

92 companies raised USD 9bn through US offerings in the first half of 2022, compared to USD 317bn across 1,073 IPOs for the entirety of 2021. Gwenlynne Lee, a counsel at Cooley, noted that the drop-off in proceeds and volume on Asian exchanges have been far lower.

Consequently, investors across multiple jurisdictions are reconsidering their listing options. Jenny Lee, a managing partner at GGV Capital, noted there would likely be a shift in the most popular listing venues over the next 3-5 years, driven not only by what is most suitable for the company but also by geopolitical issues.

"While we would love for all companies to be on the best exchange with the most depth and liquidity for us to exit, we do have to take a step back because valuations have started to factor in geopolitical risks," she said. "Then the alternative exchange would come in, but that doesn't necessarily mean we lose on quality or premium."

Lee pointed to Kingsoft Office, which raised CNY 4.5bn (USD 640m) through an IPO on Shanghai's Star Market in 2019. GGV exited once the one-year lock-up expired, with a 42x net return.

Michelle Deaker, a managing partner at Australia-based OneVentures, added that the Australian Securities Exchange has become a viable alternative to NASDAQ for smaller start-ups. Participation by local superannuation funds is a key factor.

“Australia has one of the largest pension fund markets in the world, which is surprising for most people. That's why technology companies can get quite reasonable support in terms of advisor knowledge and backup," Deaker said. "But, obviously, if a company is large enough, we would look to a NASDAQ listing because the multiple would be slightly higher."

Deaker added that down-cycles can be great times to create strong companies, in part because there are opportunities to use M&A as a means to enter new geographies. OneVentures helped one portfolio company acquire a US-based peer at a 1x multiple. This offered immediate access to a high-quality US customer base.

This view was echoed by Matthew Koertge, a managing partner at Telstra Ventures, who noted the same stories played out following the dotcom bust and the global financial crisis.

"A lot of companies out there are going to fail. It is the opportunity for our portfolio companies to pick up customers, employees and assets," he said. "They can end up in much stronger positions."

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