Venture Capital

Public markets are dead, says venture capitalist

Top investor: Public markets are dead

The private market is as strong as ever and the public markets are dead for start-ups and unicorns, venture capital investor Alan Patricof said Wednesday.

"The IPO market is no longer the real alternative for exits for … all our companies," the founder of Greycroft said in an interview with CNBC's "Closing Bell."

In fact, there have only been a "handful" of initial public offerings this year, Patricof pointed out. Instead, he thinks acquisitions are the best exit strategy for companies.

"I, frankly, am concerned for the unicorns that are out there today to really find an exit, because their only alternative is probably the public markets and the public markets are dead," Patricof added.

Michael Nagle | Bloomberg | Getty Images

Thanks to venture capital funding, there has been a proliferation of unicorns, which are start-ups valued at $1 billion or more. However, some investors are now selling shares in privately held companies.

Patricof insisted reports of venture capital drying up in the private market are not true.

The challenge, he said, is that the companies must be valued realistically with the appropriate amount of capital so that they can be acquired.

For those that do look to go public, they will have to be able to justify a market cap of at least $300 million to $400 million, said Patricof.

That's because the public is offered a maximum of 20 percent of the outstanding equity and there has to be enough money to create a lot of trading activity, he explained.

Plus, the public markets are very discerning.

"You miss your projections for the next quarter … all of a sudden you can see your stock in freefall and it is very, very hard to recover from that."

— CNBC's Jon Marino contributed to this report.