The Rise of the Pre-IPO Round

A favorite trade of 2020 and 2021—buying into a startup shortly before the company is expected to go public, often through the sale of notes convertible into equity—is bubbling again as more startups inch toward public listings. These convertible notes can act as a strong signal the company is intent on an IPO, well before it files a prospectus. They can also flag that large institutional investors have faith in a company, even if they’re uncertain about when it could go public. 

As we reported last week, cloud provider Lambda Labs is seeking to raise $350 million ahead of an IPO expected later this year. In November, the crypto exchange Kraken said it had filed for an IPO, the day after it announced a $200 million fundraising. And Motive, the trucking dashcam company formerly known as KeepTruckin, sold $150 million in convertible notes last year, it disclosed in its recent IPO filing.