Iconiq Capital, an investment group backed by prominent figures like Meta Platforms Inc. CEO Mark Zuckerberg and Twitter founder Jack Dorsey, is navigating the current market challenges by exploring alternative avenues to generate returns. This comes as a direct response to the dearth of initial public offerings (IPOs) that has significantly impacted the venture capital landscape.
The San Francisco-based firm recently concluded a $5.75 billion fund through its venture arm, Iconiq Growth, surpassing its previous $4.1 billion fund raised in 2021. This move, however, signals a shift in strategy. Partner Matthew Jacobson, in an interview with the Financial Times, acknowledged the need to adapt to the downturn in public markets, which has resulted in fewer start-ups seeking to go public. Historically, Iconiq’s value largely stemmed from public markets, with approximately 30 IPOs in the past 11 years. However, the absence of any new companies going public since 2021 has prompted the firm to explore new avenues.
Iconiq is now pivoting towards mergers and acquisitions (M&A) and the secondary market for start-up stocks. This strategy is driven by the growing liquidity needs of early shareholders, creating opportunities within the market. Jacobson highlighted this trend, stating, “We’re seeing a lot of early shareholders looking for liquidity and it creates opportunity in the market.”
Iconiq’s shift mirrors broader trends in the venture capital industry, where investment into start-ups has significantly declined. This trend is evident in Iconiq’s recent portfolio company, QGenda, which agreed to sell to Hearst for over $2 billion last month. Furthermore, Iconiq is capitalizing on the burgeoning trade in start-up secondaries to release capital.
The venture capital landscape has witnessed a significant shift due to the decline in IPOs. This has compelled firms like Iconiq to explore alternative strategies. Jacobson emphasized that the boom in artificial intelligence (AI) has attracted investor interest, but Iconiq strategically avoids investing in capital-intensive AI model developers. Instead, the firm focuses its investments on AI application start-ups, including Glean, Writer, Evolution IQ, and DeepL.
Iconiq Growth is also expanding its presence in Europe, particularly in AI hubs like Paris and London, backing companies like Adyen and Miro. Partner Seth Pierrepont underscored the supportive role of European governments in fostering AI innovation.
Iconiq’s proactive approach to adapting its strategy amidst market volatility showcases its commitment to navigating the ever-evolving venture capital landscape. Its focus on M&A, secondary market investments, and strategic AI investments in both the US and Europe positions the firm for continued growth and success in the years to come.
