It’s a great way to de-risk a pre-IPO company.
Even today, in the Best of Times for SaaS, there are risks in gearing up for an IPO. The markets could stumble. The IPO window could close for a while. Things could happen.
With so much late-stage capital around, raising say $200m 12–18 months before an IPO at a relatively modest discount to the potential IPO price is just a smart way to take a little risk off the table.
It also can have a large benefit of making a secondary offering (i.e., older shareholders and employees selling) easier to do. In a private offering, you can do whatever you want in a secondary offering, more or less.
Finally, it can give you a little time to get ready. If you have say the revenues to IPO but haven’t hired the CFO or a few others yet, private investors may be fine taking that risk. Or perhaps you want to add a quarter of profitability, or declining losses, before you IPO, so you can get a higher valuation at IPO. A little extra time to make the IPO “perfect” in terms of team and metrics can also pay dividends in today’s arguably frothy market.