Individual factors for the companies’ performances aside, the “markets have worsened since these deals launched,” which delivered a blow to post-IPO trading, said Matthew Kennedy, senior IPO strategist at Renaissance Capital, a provider of pre-IPO research and IPO ETFs. But “There was this excitement of, you know, are these going to be hot deals? And that can build on itself, but it can also go away quickly,” he told me. 

In my view, these three listings were a test—and the IPO market didn’t pass. As plenty of folks have pointed out, shares of the recent debuts—Arm last week, and Instacart and Klaviyo this week—have largely slumped from their initial price pops. Instacart is down nearly 10% since its first day, while Klaviyo initially soared in its Wednesday premier before cooling off in the afternoon. It’s now hovering around $33, a little above its IPO price. Arm, which went public last week, briefly slipped below its IPO price (of $51) on Thursday, before closing around $52, and is off almost 18% since its debut.

Some investors aren’t too concerned: “I don’t worry too much about, you know, what happens in the days or weeks after the IPO,” Venrock partner Brian Ascher told me. But he added that he doesn’t think the VCs in his circle are feeling celebratory about the recent spate of listings.

And to market watchers like Kennedy, the recent performance trend means that “the first half of 2024 is the new second half of 2023,” he says, referring to when more companies may now be looking to go public. 

I rounded out a few takeaways from the recent big IPOs—and what startups should keep in mind if they’re sharpening their pencils to write an S-1 anytime soon. 

Get ready for discounts

Venture capital investors are all chatting about discounts these days, predicting companies will be taking more down rounds and raising new funding at lower valuations than their previous rounds. That’s likely going to be true of would-be public companies, too.

Companies going public usually price shares at some discount to public peers, because they don’t have any trading history and are more risky, Kennedy notes (When times are booming, unlike now, there might not be much of a discount). “Klaviyo and Instacart…both had more of that typical IPO discount to peers,” he said. But they may have still been too ambitious with pricing. Instacart raised its range and priced at the top of that higher range, at $30 per share (the stock closed on Thursday at roughly that same level, a couple days after its debut); while Klaviyo also priced $1 above the top of its already-heightened price range of up to $29.

“We’re still arguably in a very challenging market for tech IPOs, as we see with these deals. I think that tells us we might need to see more than just a typical discount,” Renaissance Capital’s Kennedy argues. 

That means that those future IPOs in the pipeline need to be priced at a significant discount—even more than Arm, Klaviyo, and Instacart—Kennedy believes. 

The IPO “pop” is alive—kind of

There’s often debate when a company goes public over whether they “left money on the table”—investor speak for whether the company priced shares of their company too low, and could have gotten a higher price and raised more money. That can feel like the case when a company’s stock pops on IPO day, far above the price they set prior to public trading. With Arm (last week) and Instacart and Klaviyo (this week), the IPO “pop” seems alive and well, as all three companies saw their stocks soar at least 20% at some point during their first day trading. But it doesn’t mean that the companies left anything on the table.

“I think that’s pretty definitive now” that they didn’t, Kennedy says, considering their post-debut trading. With the “excitement around these being the first [big listings], I think there was some pent up demand. I think public investors probably looked at some of the recent trading as well in some of these high growth names, and were just sticking around, hoping for a pop buying in, and maybe disregarding the valuation.” 

There’s also two notable points here: One, all three of these companies had limited floats available at the IPO (meaning they didn’t sell a huge portion of shares to investors, thereby limiting supply); and two, although they all closed above the IPO price on their first day, Instacart and Klaviyo, in particular, saw the so-called pop lose a lot of steam later in the afternoon.

“You need to see both demand at the IPO price and aftermarket,” notes Kennedy. 

The P in IPO is for “Profitable-plus” 

It’s obvious at this point, but to hammer it home, other IPO hopefuls will need to give investors plenty of growth and profitability if they stand a chance in the current market. And even that might not be enough.

All three companies were profitable at their IPO (Instacart was profitable but showing some slowing growth, while Klaviyo and Arm were also profitable). Moving forward, “Investors want to see this elite group of companies that have rule-of-40 growth [a popular metric for determining healthy growth for software-as-a-service companies] and profitability,” Kennedy says. However, although some of these recent IPOs had that, trading has been blah. And there are plenty more tech unicorns in the pipeline that have weaker financials than Klaviyo that would therefore not garner a lot of demand, predicts Kennedy. 

For now, the market is closed to those who don’t have strong growth, profitability, and a “compelling” valuation, Kennedy believes. “Not a lot of tech companies can deliver on all three.” 

Cutting ties…Yesterday, venture capital firm GGV Capital sent a notice to its limited partners that it plans to separate its China and U.S. teams, as was first reported by The Information. That follows increased scrutiny from Congress officials over U.S. venture capital firms’ investments into Chinese startups. Earlier this year, a bipartisan House committee led by Wisconsin Representative Mike Gallagher had sent a notice to VC firms including GGV Capital that it was examining their investments in Chinese semiconductor, AI, and quantum computing companies. GGV Capital’s plans to sever ties with its Chinese operation follows a similar move from Sequoia Capital. A GGV spokeswoman directed Term Sheet to the notice they published on Twitter, but declined to comment further. —Jessica Mathews

Have a great weekend,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
Submit a deal for the Term Sheet newsletter here.

Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- CMR Surgical, a Cambridge, U.K.-based surgical robotics company, raised $165 million in funding from SoftBank, Ally Bridge Group, Cambridge Innovation Capital, Escala Capital, LGT, Lightrock, RPMI Railpen, Tencent, Watrium, and others. 

- Openly, a Boston, Mass.-based homeowner insurance provider, raised $100 million in Series D funding. Eden Global Partners led the round and was joined by Gradient Ventures, Clocktower Technology Ventures, Trinity Capital, and others. 

- Curve, a London, England-based app that connects users’ credit and debit cards into one single card and app, raised £58 million ($71.3 million) in a Series C extension from Britannia, IDC Ventures, Cercano Management, Cohen Circle, and others. 

- Legit Security, a Tel Aviv, Israel-based platform that analyzes an app’s code to detect vulnerabilities, raised $40 million in Series B funding. CRV led the round and was joined by Cyberstarts, Bessemer Venture Partners, and TCV.

- Diligent Robotics, an Austin, Texas-based developer of robotic automation solutions for the healthcare industry, raised $25 million in funding. Canaan led the round and was joined by True Ventures, DNX Ventures, Next Coast Ventures, and Northwestern Medicine Innovation.

- JURA Bio, a Boston, Mass.-based company using machine learning and synthetic biology to develop new therapeutics, raised $16.1 million in funding from Michael Chambers, John Ballantyne, Fontus Capital, Josh Elkington, and others. 

- Mammaly, a Berlin, German-based pet supplements brand, raised €14 million ($14.9 million) in Series A funding from IRIS Ventures and Five Seasons Ventures.

- Secoda, a Toronto, Canada-based AI-powered data management platform, raised $14 million in Series A funding. Craft Ventures led the round and was joined by Abstract Ventures, existing investors YCombinator and Garage Capital, and others. 

- Allocate, a Palo Alto, Calif.-based platform for managing private investments, raised $10 million in funding from Gopher Asset US, Intera Investments, M13 Ventures, and others.

- Rocket.chat, a Wilmington, Del.-based secure messaging platform, raised $10 million in Series A funding from Valor Capital Group, Alexia Ventures, Endeavor Catalyst, Endeavor Scaleup Ventures, Bob Young, and others. 

- CoinScan, a Tel Aviv, Israel-based crypto analytics and data platform, raised $6.4 million in funding from Shalom MecKenzie, Mor Weizer, Roy Samuelove, and others. 

- Afterparty, a Los Angeles-based platform for creators to interact with fans and monetize content, raised $5 million in funding. Blockchange Ventures led the round and was joined by Acrew Capital, Act One Ventures, Tamarack Global, and others. 

- Sidekick Browser, a San Francisco-based internet browser for professionals designed to increase productivity and reduce distractions, raised $4 million in funding from Runa Capital, Kleiner Perkins, GIVC, S16VC, Recursion Ventures, and others. 

- Openvolt, a Dublin, Ireland-based startup designed to help companies track their energy data, raised €1.5 million ($1.6 million) in pre-seed funding. Cavalry Ventures led the round and was joined by Übermorgen Ventures.

PRIVATE EQUITY 

- Gurnet Point Capital and Novo Holdings acquired Paratek Pharmaceuticals, a Boston, Mass.-based pharmaceutical research company, for $462 million, including debt.

- Brightstar Capital Partners acquired Douglas Products and Packaging Company, a Liberty, Mo.-based manufacturer and marketer in the agriculture and pest control markets. Financial terms were not disclosed. 

EXITS

- North Branch Capital acquired STARC Systems, a Brunswick, Maine-based company that manufactures temporary walls, from Blue Heron Capital. Financial terms were not disclosed. 

OTHER

- Cisco Systems agreed to acquire Splunk, a San Francisco-based cybersecurity firm, for approximately $28 billion. 

FUNDS + FUNDS OF FUNDS

- Astanor Ventures, a Kirchberg, Luxembourg-based venture capital firm, raised €360 million ($384 million) for its second fund focused on agriculture and food technology companies. 

PEOPLE

- Galaxy Digital Holdings, a New York City-based venture capital firm, named Leon Marshall as chief executive officer of Galaxy Europe. Formerly, he was with Genesis.

- Project A, a Berlin, Germany-based venture capital firm, hired Malin Posern as partner. Formerly, she was with Passion Capital.

- 645 Ventures, a New York City-based venture capital firm, hired Mendy Yang as a senior associate, and Willy Hess as a senior associate. Formerly, Yang was with Lerer Hippeau and Soma Capital, and Hess was with Thrive Capital.