Car-sharing service Turo filed its IPO prospectus in January 2022. A month earlier, Reddit said it submitted a draft registration for a public offering. Instacart’s confidential paperwork was filed in May of last year.

None of them have hit the market yet.

Despite a bloated pipeline of companies waiting to go public and a rebound in tech stocks that pushed the Nasdaq up 30% in the first half of 2023, the IPO drought continues. There hasn’t been a notable venture-backed tech initial public offering in the U.S. since December 2021, when software vendor HashiCorp debuted on the Nasdaq.

Across all industries, only 10 companies raised $100 million or more in U.S. initial share sales in the first six months of the year, according to FactSet. During the same stretch in 2021, there were 517 such transactions, highlighted by billion-dollar-plus IPOs from companies including dating site Bumble, online lender Affirm, and software developers UiPath and SentinelOne.

As the second half of 2023 gets underway, investors and bankers aren’t expecting much champagne popping for the rest of the year.

Many once high-flying companies are still hanging onto their old valuations, failing to reconcile with a new reality after a brutal 2022. Additionally, muted economic growth has led businesses and consumers to cut costs and delay software purchases, which is making it particularly difficult for companies to comfortably forecast the next couple of quarters. Wall Street likes predictability.

So if you’re waiting on a splashy debut from design software maker Canva, ticket site StubHub or data management company Databricks, be patient.

“There’s a disconnect between valuations in 2021 and valuations today, and that’s a hard pill to swallow,” said Lise Buyer, founder of IPO consultancy Class V Group in Portola Valley, California. “There will be incremental activity after a period of absolute radio silence but it isn’t like companies are racing to get out the door.”

The public markets tell an uneven story. This year’s rally has brought the Nasdaq to within 15% of its record from late 2021, while an index of cloud stocks is still off by roughly 50%.

Some signs of optimism popped up this month as Mediterranean restaurant chain Cava went public on the New York Stock Exchange. The stock more than doubled on its first day of trading, indicating high demand from retail investors. Buyer noted that institutions were also enthused about the deal.

Last Friday, Israeli beauty and tech company Oddity, which runs the Il Makiage and Spoiled Child brands, filed to go public on the Nasdaq.

That all comes after a big month for secondary offerings. According to data from Goldman Sachs, May was the busiest month for public stock sales since November 2021, driven by a jump in follow-on deals.

While investors are craving new names, they’re much more discerning when it comes to technology than they were at the tail end of the decade-long bull market.

Mega-cap stocks Apple and Nvidia have seen outsized gains this year and are back to trading near all-time highs, boosting the Nasdaq because of their hefty weightings in the index. But the advances are not evenly spread across the industry.

Few have been hit as hard as Instacart, which has repeatedly slashed its valuation, from a peak of $39 billion to as low as $10 billion in late 2022. Last year, the company confidentially registered for an IPO, but still hasn’t filed publicly and doesn’t have immediate plans to do so.

Like Instacart, Turo operates in the sharing economy, a dark spot for investors last year. Airbnb, Uber and DoorDash have all bounced back in 2023, but they’ve also instituted significant job cuts. Turo has gone in the opposite direction, more than doubling its full-time head count to 868 at the end of March from 429 at the time of its original IPO filing in 2021, according to its latest filing. The company reportedly laid off about 30% of its staff in 2020, during the Covid pandemic.

Turo and Instacart could still go public by year-end if market conditions continue to improve, according to sources familiar with the companies who asked not to be named because they weren’t authorized to speak publicly on the matter.

Byron Deeter, a cloud software investor at Bessemer Venture Partners, doesn’t expect any notable activity this year, and says the next crop of companies to debut will most likely wait until after showing their first-quarter results in 2024.

“The companies that were on file or were considering going out a little over a year ago, they’ve pulled, stopped updating, and overwhelmingly have no plans to refile this calendar year,” said Deeter, whose investments include Twilio and HashiCorp. “We’re 10 months from the real activity picking up,” Deeter said, adding that uncertainty around next year’s presidential election could lead to further delays.

In the absence of IPOs, startups have to consider the fate of their employees, many of whom have a large amount of their net worth tied up in their company’s equity, and have been waiting years for a chance to sell some of it.

Stripe addressed the issue in March, announcing that investors would buy $6.5 billion worth of employee shares. The move lowered the payment company’s valuation to about $50 billion from a high of $95 billion. Deeter said many late-stage companies are looking at similar transactions, which typically involve allowing employees to sell around 20% of their vested stock.

He said his inbox fills up daily with brokers trying to “schlep little blocks of shares” from employees at late-stage startups.

“The Stripe problem is real and the general liquidity problem is real,” Deeter said. “Employees are agitating for some path to liquidity. With the public market still pretty closed, they’re asking for alternatives.”

G Squared is one of the venture firms active in buying up employee equity. Larry Aschebrook, the firm’s founder, said about 60% of G Squared’s capital goes to secondary purchases, helping companies provide some level of liquidity to staffers.

Aschebrook said in an interview that transactions started to pick up in the second quarter of last year and continued to increase to the point where “now it’s overwhelming.” Companies and their employees have gotten more realistic about the market reset, so significant chunks of equity can now be purchased for 50% to 70% below valuations from 2021 financing rounds, he said.

Because of nondisclosure agreements, Aschebrook said he couldn’t name any private company shares he’s purchase of late, but he said his firm previously bought pre-IPO secondary stock in Pinterest, Coursera, Spotify and Airbnb.

“Right now there’s a significant need for that release of pressure,” Aschebrook said. “We’re assisting companies with elongating their private lifecycle and solving problems presented by staying private longer.”

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