VWB #8: 2023's Trailblazing IPOs and the Dawn of 2024 🚀🌅

We’re so back!

Happy New Year from VWB! After a fabulous break with our respective families, we’re so excited to kick off 2024 with lots of great content and new features for our readers. Thank you again for all the support, and we can’t wait to grow together in the year ahead. Let’s dive in!

In this week’s edition, we take one final look at 2023 to discuss macro-trends in the IPO scene across the globe, and highlight some of the most exciting IPOs that took place last year: Birkenstock and VinFast. From a company older than the US to a trailblazer in clean energy in South East Asia, it’s clear that IPOs during 2023 were full of flair–and we’re looking forward to more companies going public in 2024. 

In the second part of our edition, we take a look at the year ahead of us, and in particular talk about the uncertain future of early-stage VC firms. We break down investor Jai Malik’s reflections on venture in the current climate and offer our own predictions for VC in the year ahead. 

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2023 in review: A resurgence in IPOs 📈

In the midst of a challenging year with high inflation and interest rates, 2023 saw the resumption of IPO listings in the market–and we were glad to see that there is growing optimism around it for months to come. Indeed, 2023 saw a 15% increase in IPOs across the Americas compared to 2022. While there were 18% fewer IPOs in Asia-Pacific in 2023 compared to the previous year, China still contributed over 40% of global IPO proceeds for 2023. 

(Birken)Stocks are…

In our opinion, one of the most interesting IPOs from 2023 was Birkenstock, the originally-German footwear company producing iconic sandals. In October of this year, Birkenstock IPO’ed for $7.5B USD. While admittedly the company had an underwhelming debut and many speculated it was recklessly overvalued, Birkenstock fans will be relieved to note that the company now trades at a market cap of $8.5B. 

Since its establishment in 1774–yes, they precede the US independence–it was a family business until 2021, when they sold a majority stake to an American private equity firm backed by luxury conglomerate LVMH. Since then, they have drafted plans for Birkenstock to collaborate with Dior in producing a luxury line, with sandals priced at $1,100 each.  

 While it seems that the decision to go public was at least partly informed by family drama (which is interesting in its own right), we were also captivated by its CEO, Oliver Reichert, who in a previous life was a war correspondent. Despite the great attention that Birkenstock received in 2023–not least with a cameo during Greta Gerwig’s Barbie movie–Reichert has repeatedly stated that they will continue to refuse ‘chasing trends’, and will not engage in collaborations that compromise the company’s “way of thinking and way of living.”

…Moving (Vin)Fast

VWB was also excited to see VinFast’s IPO in August 2023, for $23B USD. The Vietnamese company has been producing electric vehicles since its creation in 2017, and is one of the largest automakers in the country. Our favorite part about VinFast is its diverse models of EVs, as they produce SUVs, scooters and buses, and have established EV chargers across 60 cities and provinces in Vietnam.

The stock appreciated dramatically right after its first day, and at some point the market cap for VinFast was higher than Ford and GM combined. While the stock has fallen 40% since then, 2024 looks bright for them: they just began exporting cars to the US last year, and they established a new factory in North Carolina, which will be able to produce 150,000 EVs per year.

The year ahead 🧧

2024 kicked off with some tough times–and ominous warnings–for small VC firms. VC enthusiasts may have been surprised when solo general partner Jai Malik announced last week that Countdown Capital, an early-stage VC firm for hard tech, is shutting down. Despite closing a $15M fund just over a year ago, the fund will return uninvested capital and cease operations by March 2024.

In a letter to investors, Malik asserted that large, multi-stage VC firms with more money and resources are better positioned to support startups succeed. According to Malik, small VC firms, particularly those that specialize in specific verticals like hardtech, will not be able to keep up and yield strong returns in the future. While early access to promising ventures was traditionally a competitive advantage for smaller players, he contends that this advantage is rapidly eroding.

Malik's prognosis for 2024 and beyond outlines a scenario where the growth path of industrial startups fails to outpace the investment pace of large VC firms. Consequently, smaller VC firms will find themselves priced out of investment rounds when pitted against the financial might of multi-stage firms competing for a place in the cap table. The underlying message is clear: in this evolving VC landscape, survival demands adaptability–and small,early-stage VC firms have their work cut out for them. 

Our Translation - Is this the end of democratized VC?

To be sure, Malik’s letter states clearly that VC and VC-backed hard tech companies are here to stay. However, the pivotal concern for VC firms revolves around the validity in his assertion that small and early-stage VC firms face an uncertain future. Over the past decade, unnaturally cheap capital, raging bull markets, and the proliferation of social media + digitization of the economy led to an explosion of solo GP’s, influencer GP’s, and celebrity funds. Being a venture capitalist was the cool thing to do and these micro-funds carved out a very successful niche in pre-seed and seed stage investing with the value proposition of highly specialized theses, high-touch, value-add expertise and support for founders, and hype-driven marketability.

Legacy VC players adjusted, raising mega funds targeted ever earlier. Many analysts predicted that these mega early-stage funds would not be successful, as the unit economics and dynamics of early-stage investing were not simpatico with the dry powder these funds would have to deploy. Unfortunately for your favorite micro-funds, the increased competition to win deals and availability of capital resulted in record high valuations and funding rounds. For a detailed analysis of that moment in history, we highly recommend this quick read from Isabel Hazan. The result of this venture explosion for the myriad of emerging funds? Venture rounds that effectively priced out small funds and turned their model upside down. This is precisely what happened to Mr. Malik and Countdown Capital.

So, where do we go from here? 

At VWB we are certain that, if there is a group that is nimble, can act quickly, and loves to test creative hypotheses, it is precisely the emerging managers and niche funds. We are still bullish about the opportunities for new players within venture capital. However, we believe that their value proposition must evolve even further from simply capital–which the legacy players can provide in spades–to expertise, guidance, connection, and other tools that only the most intimate, long-standing, and deeply invested investor relationships can offer.

Your bold prediction for 2024 🎤

We want to hear from you! What’s your bold prediction for 2024? Respond to this email or engage with us on Twitter to share your take on any of the following topics:

1. Will more small VCs close shop or will they pivot? And what to? 

2. Who will win the US presidential election, and how will it impact foreign relations? 

3. Will the economy improve, or are we sliding headlong into a recession?

Cheers to an exciting year ahead!

-Paula and James