The relationship between private and public markets has evolved over the past two decades. While initial public offerings (IPOs) once provided investors access to companies during their highest-growth years, much of that value creation now occurs before businesses ever reach the public markets. Historically, companies went public relatively early in their life cycle. Between 1980 and 1999, the average company completed its IPO at roughly eight years old. From 2000 to 2024, that figure was closer to eleven years. Over that same time, annual IPO activity has fallen sharply, declining from an average of 307 IPOs per year to just 125. Both the regulatory and financial requirements for becoming a public company have also risen considerably. Prior to 2017, companies could often access public markets with approximately $90 million in annual revenue. Today, successful IPO candidates frequently generate $200–300 million or more before pursuing a listing.[1][2]

Advances in technology have accelerated this trend. ChatGPT reached one million users in just five days, compared with five months for Spotify, ten months for Facebook, and three and a half years for Netflix. Companies can now scale globally at unprecedented speeds while remaining private, supported by abundant venture capital and private market funding. This shift has fueled comparisons between today’s AI boom and the late-1990s dot-com era due to robust valuations. Unlike many dot-com companies that entered public markets before demonstrating commercial viability, many of today’s largest private companies possess substantial recurring revenue, established customer bases, and proven business models. Yet questions remain around private market valuations. More than half of the world’s 1,648 active unicorns—privately held startups valued at over $1 billion—have not raised capital in over two years. Many valuations were established during the funding boom of 2020 and 2021 and remain largely untested by recent transactions.[3][4]

No company better illustrates the changing capital markets landscape than SpaceX. Founded 24 years ago, the company has remained private while growing into one of the world’s most valuable businesses. In the largest IPO ever, SpaceX raised roughly $75 billion at an approximate $1.75 trillion valuation. This historic IPO included retail investor participation well above traditional IPO allocations, an accelerated Nasdaq 100 benchmark inclusion, and a relatively small public float of approximately 5%. This level of scale and capital formation would have been difficult to imagine for a private company just a generation ago.

OpenAI and Anthropic are anticipated to IPO within the next year at valuations in the hundreds of billions of dollars. The challenge, however, is determining where the marginal investment dollar will come from. Investors today have more choices than ever across public and private markets. For much of the past two decades, U.S. equities benefited from share scarcity. S&P 500 companies alone repurchased nearly $12 trillion of stock through buybacks, reducing public share counts and supporting valuations. According to JPMorgan, however, IPOs, secondary offerings, and other share issuances could add roughly $1.5 trillion of net equity supply to public markets over the next two years, representing the largest period of issuance since the late 1990s. In addition, many investors already have indirect exposure to private AI and technology companies due to investments from the public hyperscalers (AMZN, MSFT, GOOG, META) which consume large percentages of the S&P 500 and have already benefited from the increased valuation markups of these private companies.[5]

Recent IPO performance highlights a broader reality: much of the growth and value creation now occurs in private markets. By the time many companies reach public investors, a substantial portion of their expansion has already taken place, as exhibited by SpaceX going public at a $1.75 trillion valuation. This helps explain why post-IPO performance has been mixed in recent years.

This evolution does not diminish the role of public markets. Rather, it underscores the increasingly complementary relationship between public and private investments. Public markets continue to provide liquidity, transparency, and broad economic exposure, while private markets offer access to innovative companies and growth opportunities unavailable within public markets. Understanding the distinct role each market plays and the trade-offs between growth potential, liquidity, and risk will be increasingly important as investors navigate the next phase of capital market evolution.

Sources:

[1] iCapital Alternatives Decoded: Navigating the World of Alternative Investments Q1 2025

[2] State of Venture – Allocate

[3] Why Venture – Allocate

[4] Unicorn Tracker – Pitchbook

[5] $12 Trillion Stock Squeeze – Bloomberg Law