For smaller firms and startups seeking capital — the lifeblood of growth — the last few months of 2024 are holding some promise after a long drought of high interest rates and stubborn inflation.
The IPO market has rebounded, up 30% for the first half of 2024 year over year. Venture capital has also seen a 20% uptick from last year. Deal sizes have increased across sectors as diverse as artificial intelligence, healthcare technology and climate technology.
“We’re starting to see more and renewed interest from crossover and mutual fund investors in later stage rounds … and there’s a record amount of dry powder for venture capital and growth equity firms that have been kind of sitting on the sidelines,” Melissa Smith, co-head of innovation economy and head of specialized industries for J.P. Morgan commercial banking, told PYMNTS.
Looking out to the end of the year, based on public filings and J.P. Morgan’s own pipeline visibility, the current year could log $30 billion in terms of IPO volumes, above $19 billion in volume seen last year, Smith said.
Beyond those optimistic developments, like just about everyone else, she noted, founders are “trying to figure out where things are headed from a broader macroeconomic perspective.”
The prevailing wisdom is that the Federal Reserve will start lowering rates at some point during the third quarter of 2024. Against that backdrop, the U.S. economy seems like it’s moving toward a soft landing.
But founders must be ready for all sorts of permutations of reality and in the meantime are steering their firms through growth, investment and seed rounds, using a combination of funding and partnerships to bring their innovations to market. Preserving cash flow is imperative, and banking partners can help provide stability and visibility into day-to-day cash management, Smith said.
The investment community is a tight-knit one, Smith said, adding that “founders and partners and firms are clearly constantly talking to each other, sharing ideas, seeking advice and forming powerful connections.”
At the center of it all lies J.P. Morgan, with a full suite of solutions and expertise to help those companies connect and innovate collectively.
Smith noted that “we want to, and can, holistically serve the ecosystem” across portfolio companies, founders and VC partners with payments and liquidity solutions and financing alternatives.
By way of example, she offered up J.P. Morgan’s continued journey with Closinglock, which provides wire fraud prevention and FinTech solutions to the real estate industry. The bank has supported Closinglock from the seed stage to its current role of providing traditional banking services to the company. Beyond those interactions, J.P. Morgan has also helped Closinglock embed payments into its platform.
Smith said traditional banks can bring a multi-disciplinary approach to helping client firms manage cash flow and operations more efficiently — in contrast to FinTechs, which as partners, may have niche expertise but lack that broader worldview. But there’s been a positive knock-on effect from the rise of FinTechs, she added, as they’ve forced banks to fine-tune their own innovations and how they partner with corporate clients in the startup community.
The financial institutions, she said, “are learning a little bit from the FinTechs and how nimble they’ve been in terms of the client experiences that they have built.” The banks also have inherent advantages tied to the scale and breadth of their payments and cybersecurity and risk management offerings.
“Having the perspective of some of the largest [client] companies in the world, and how they’ve built their own infrastructure to get there, is advice and dialogue worth having with the earliest stage companies,” Smith said.
In the coming months and years, Smith noted, J.P. Morgan is focused on honing its digital experiences for its customer bases, improving its onboarding capabilities and offering digital end-to-end workflows to a variety of sectors and subsectors.
“We’re not here to just be what people would consider a traditional banking provider,” Smith said. “We want to be a partner to these companies, these firms, these founders in order to help meet any of their businesses’ challenges or objectives and help them scale and grow … and supporting the founders as investors in the innovation economy.”