AI’s share of venture funding climbed to 80% this quarter, up from 55% a year ago. The deployment is real. The liquidity question behind it is the one founders should be paying attention to.

In 2025, SA国际传媒 roughly 2,300 venture-backed acquisitions against just 65 IPOs. In aggregate, the LPs sitting behind every venture fund have been in since 2022. Record deployment in Q1 doesn’t change the math at the LP level, and that pressure is reshaping every term sheet, follow-on decision and board conversation in venture right now.

Know what’s actually driving the firm across the table

When a partner walks you through their thesis, they’re telling you a story about your market; rarely are they telling you a story about their fund. That second story determines whether they can write your bridge in 18 months, whether they’ll fight for pro rata in your Series B, and whether their behavior in the next downturn looks like patience or anxiety.

LPs are demanding cash back. Paper markups aren鈥檛 enough. Some firms are responding well, consolidating into their best companies and being deliberate about new commitments while others are pretending it’s still 2021. Founders should know which type they’re sitting across from before signing anything.

Ask the questions founders rarely ask

Three reference calls with portfolio CEOs used to be enough due diligence on a VC. Not anymore.

Ask what vintage the partner’s current fund is and how much dry powder is left. Ask how many of their 2018 through 2020 companies have produced realized returns rather than paper markups.

Ask whether their LPs have been pushing for GP-led secondaries. If the answer is yes, the firm is operating under a cash-flow constraint that will show up in your boardroom. These aren’t rude questions. They’re the same ones serious LPs are asking that partner this quarter, and high-quality firms welcome the conversation.

Build your buyer relationships now

If you’re raising in 2026, you’re statistically far more likely to get acquired than to ring the bell at the . Q1 2026 alone produced, the third-busiest quarter since 2022. Of the 21 venture-backed exits over $1 billion globally last quarter, only four happened in the U.S. The exit window for American founders is narrower than the headline funding numbers suggest.

Smart founders design for that reality from Series A. They know which platform companies have an active corporate development team. They build product surface area that maps cleanly into someone else’s stack. They cultivate executive relationships at the most likely acquirers years before any sale conversation, so when one starts naturally the introduction is already there.

Capital is plentiful. Discipline is what separates outcomes.

Every dollar concentrated into the four AI mega-rounds is a dollar that hasn’t returned anything to LPs yet. Founders who understand the LP-to-GP-to-startup chain end up with better partners, smarter terms and companies built for more than one path to a great outcome.

As the co-founder and managing partner of , is committed to establishing MGV as the premier venture firm for world-class tech entrepreneurs to accelerate their visions. Under Schr枚der鈥檚 stewardship, MGV has swiftly ascended to a top-quartile firm, surpassing the performance of 95% of venture funds. The performance of MGV is driven by Schr枚der鈥檚 unique approach to venture investing 鈥� that providing intensive sales training, devising robust fundraising strategies and securing follow-on investments is the best way to support founders and drive the deepest return for investors. has recognized him as one of the Top 100 global seed investors, and his perspectives are published regularly in SA国际传媒 News and other leading publications.

Related reading:

• What The Record Venture Funding Quarter Actually Means For Your Startup鈥檚 Fundraise
• Q1 2026 Shatters Venture Funding Records As AI Boom Pushes Startup Investment To $300B

Every year for the past several years, the same prediction circulates: This is the year the IPO market comes back. We said it in 2025. We said it in 2026. We’ll probably say it again in 2027.

And every year, a handful of headline-grabbing offerings get held up as proof. This cycle it’s , and . The narrative writes itself: the window is open, the giants are listing, the market is back.

But here’s the catch: those aren’t IPOs for the rest of the market. They’re exceptions to a rule that has been hardening for 30 years.

The IPO market isn’t closed. It’s shrinking.

The instinct is to treat the IPO drought as cyclical, a consequence of rate hikes, market volatility or investor risk appetite. Fix the macro, the thinking goes, and the listings follow.

The data doesn’t support that story.

In 1996, more than 8,000 companies were listed on U.S. stock exchanges. Today, fewer than 4,000 are, even as the U.S. economy has tripled in size.

The bar to go public has moved in one direction.

In 1980, the median company went public with around $64 million in revenue in today’s dollars. Today, the typical IPO candidate has revenue that would have made it a mid-cap public company a generation ago.

The result: Companies are staying private far longer, and the liquidity that shareholders were counting on keeps getting pushed out.

Every time the IPO window 鈥渞eopens,鈥� it reopens at a higher threshold than before. Waiting for conditions to return to historical norms isn’t a strategy. It’s a bet against a structural trend that has outlasted every rate cycle, bull market and recovery in recent memory.

The companies left behind

When the bar rises high enough, it doesn’t just delay IPOs. It eliminates them.

There are thousands of private companies in the United States today with $50 million, $100 million, $200 million in annual revenue, with continued growth. Previously, companies at that scale formed the backbone of the public markets. Today they’re still private, and most will stay that way.

Not all of them are great businesses. Some raised at 2021 peak valuations and are quietly running out of runway. But a real subset has grown past the early venture stage. They have revenue, margins and years of operating history. The IPO was supposed to be the exit. For most of them, it won’t be.

Who’s actually suffering

Employees at these companies made a bet: below-market salaries, equity instead of cash, years of building. Their equity was supposed to be liquid by now. It isn’t. Meanwhile, life has continued: mortgages, children, aging parents, career crossroads.

I lived this at . When I left, exercising my options triggered a tax bill I couldn’t afford without finding liquidity for shares I didn’t know how to sell. The market for these shares exists in theory. In practice it’s opaque, fragmented and slow. A transaction that should take weeks can take months, if it closes at all.

Venture general partners are in a different bind. Their funds are locked in companies with no exit path. Distributed to Paid-In capital is near historic lows. Limited partners who expected returns from prior vintage funds are still waiting, either holding back re-commitments or concentrating capital into the megafunds that can generate deal flow regardless of exit conditions. The mid-tier manager without DPI is struggling to raise.

A small number of the most prominent companies can run tender offers, giving employees a company-sponsored, structured opportunity to sell their shares.

For everyone else, there are brokered secondary marketplaces that work, slowly and imperfectly, for a narrow slice of the most in-demand names. According to , 90% of all venture secondary volume was concentrated in just 15 companies last quarter. For the rest, the market barely functions.

We’ve been here before

This situation has a historical parallel most people in finance have forgotten.

In the late 1800s, the was the only legitimate listing venue, and it was selective. Hundreds of real companies couldn’t meet the requirements, so brokers took matters into their own hands. They gathered on Broad Street, outside the NYSE, and began trading unlisted stocks on the curb. Literally on the sidewalk. It was chaotic, informal, fragmented. No centralized pricing. No standardized process. No real infrastructure.

But the companies were real. And the demand was real.

Over time, the curb traders organized. They moved indoors. They built rules and infrastructure. The Curb Market became the . The companies that traded there weren’t defective, the system was.

The private secondary market today looks a lot like that sidewalk. Fragmented brokers. Inconsistent pricing. Transactions that depend on who you know. The companies being traded are real. The demand is real. The infrastructure doesn’t exist yet, but it’s coming. Markets that serve real economic needs don’t stay informal forever.

The original Curb Market didn’t fail. It grew up. What’s happening in private secondaries today will do the same. The only variable is timing, and the shareholders waiting on liquidity are the ones absorbing the cost of that delay.

听 is the founder of and managing partner of Earlyasset Capital, where he is building infrastructure for and investing in the venture secondary market. Earlier in his career, he was part of the original founding team at .

Related SA国际传媒 query:

Related reading:

• The IPO Window Won鈥檛 Stay Open On Its Own
• Forecast: 2024 Was Slow For Tech IPOs, But 2025 Could Be Different
• SA国际传媒 Predicts: IPOs Picked Up In 2025 And The Outlook For 2026 Is Even More Optimistic

Illustration:

Notably, the valuation represents an impressive 49% increase from the $106.7 billion Stripe was valued at in September, when it completed . That deal marked the first time that Stripe had surpassed its previous peak that it achieved in March 2021.

Stripe declined to comment on the latest secondary sale beyond , in which it noted that the majority of funds for the tender offer are being provided by investors, including , , and others. Stripe said it will also use a portion of its own capital to repurchase shares, but did not specify how much.

The company, which counts the likes of , , , , and as customers, says that businesses running on Stripe generated $1.9 trillion in total volume, up 34% from 2024. Beyond payments, Stripe says its revenue products, including billing, invoicing and tax, are on track to collectively hit an annual run rate of $1 billion in 2026.

Tender offers have become more common as an increasing number of startups choose to stay private longer. Generative AI company is also believed to be working on its own at a valuation of at least $350 billion.

Total global funding to VC-backed financial technology startups totaled $51.8 billion for 2025, per SA国际传媒 . That鈥檚 a fairly significant 鈥� 27% 鈥� increase from 2024鈥檚 total of $40.8 billion raised.

Related SA国际传媒 Pro query:

Related reading:

• Q&A: Why Deep Tech Investors Are Turning To The Secondary Market For Liquidity
• Secondary Financings Offer Lifeline In A Slow Exit Market
• 鈥榃hy Not?鈥� How Sales Automation Unicorn Clay Uses Tender Offers To Reward Employees Without An Exit In Sight

Illustration:

The creation myth is familiar: founders in a garage, a seed check and then (many years, and many rounds later) an IPO that serves as a liquidity event for insiders. In this story, the public markets are where the startup goes to retire.

But this is historically illiterate. went public in 1997, three years after founding, at a market cap of $438 million. It had $15.7 million in revenue. Nearly everything Amazon would become (the marketplace, , the logistics empire) was built after it became a public company.

The same is true of , and , the latter of which went public at under $1 billion and has since become the most valuable company on Earth.

In the 1990s, the median tech company went public when it was 4 to 7 years old. Public investors didn鈥檛 buy the tail-end of innovation 鈥� they funded the vast majority of it.

It remains true today. Just look at the 鈥淢agnificent 7.鈥�

Amazon vs. WeWork

When the dot-com bubble burst, Amazon鈥檚 stock collapsed to single digits. That crisis forced to restructure the cash conversion cycle, close distribution centers and lay off 15% of staff. Amazon posted its first profitable quarter in Q4 2001. The public market鈥檚 ruthlessness was the forge that hardened the business model.

Now compare this to what the 鈥淧rivate-for-Longer鈥� era has produced. By 2024, the median VC-backed company , a full decade later than many 1990s counterparts.

Shielded from quarterly accountability, short sellers and skeptical analysts, companies like accumulated $47 billion valuations while hiding behind metrics like 鈥淐ommunity Adjusted EBITDA.鈥� When WeWork finally tried to list, the market rejected it instantly. But by then, billions had been wasted. Private market opacity had delayed diagnosis until the rot was terminal.

Discipline creates strength

The data is damning across the board. The 2010鈥�2020 cohort of VC-backed IPOs generated a return relative to the S&P 500. In 2021, only 25% of IPOs were profitable.

went public at a 77% discount to its 2021 valuation. went bankrupt. The Renaissance IPO ETF fell over 50% from its peak.

Meanwhile, 鈥檚 research shows that of a company鈥檚 lifetime value creation now occurs in private markets, accessible only to institutional investors. The returns to innovation have been privatized while the risks have been socialized.

The central paradox is that more private funding has not produced more innovation, it has simply . Abundant capital allowed 鈥渂litzscaling,鈥� promoting growth over efficiency, far longer than the market would naturally tolerate. In the 1990s, a company could burn cash for three or four years before facing discipline. Today, it鈥檚 well over a decade and the result is companies that eventually go public with .

None of this means venture capital is unimportant. Early-stage risk absorption remains vital. But innovation is a lifecycle, and the lifecycle includes a public chapter that is not optional. What matters is the handoff, the transition from private incubation to public maturation, where ideas are tested, funded and held accountable by the broadest possible base of investors. The most consequential companies in technology history made that handoff early. The generation that delayed it has delivered the worst returns and the most spectacular failures.

If innovation is the goal, the handoff matters. And we have been fumbling it.

, a frequent guest author for SA国际传媒 News, is the research lead at , a platform that allows VCs and angel syndicates to raise and deploy capital globally.

Related reading:

• The Great 鈥楢I Bubble鈥� Debate
• Why Raising Too Much Funding Is Often Fatal
• Should VCs Invest In 鈥楯ockeys鈥� Or 鈥楬orses鈥�?

Illustration:

Clay鈥檚 back-to-back tender offers underscore a growing shift among high-growth startups: rewarding employees with liquidity long before an IPO is in sight. As companies stay private longer 鈥� and hit major revenue milestones at breakneck speed 鈥� secondary sales are becoming a tool not just for retention, but for signaling strength. In Clay鈥檚 case, the two tenders followed rapid valuation jumps and a sprint to $100 million in ARR, positioning liquidity as a performance-based reward rather than a prelude to exit.

鈥淏uilding a generational business is a marathon, and tenders help equity feel real when top talent has options,鈥� said , a partner at who noted that as companies stay private longer and talent competition intensifies, tender offers can be a powerful tool for recruiting, morale and retention.

Still, he noted, there tend to be limits. 鈥淚n the tender offers we鈥檝e participated in, most employees were limited to selling just 10-25% of their vested holdings, and nearly half of founders didn鈥檛 sell a single share, signaling long-term conviction,鈥� he wrote via email. 鈥淓ven modest liquidity can make a big difference, translating to life milestones like a down payment on a first home, a child鈥檚 education, or helping a loved one transition into care.鈥�

Clay鈥檚 previous tender, led by , happened in May 2025 at . In between the two tender offers, the startup closed at a $3.1 billion valuation. In total, New York-based Clay has raised $206 million in equity since its 2017 inception. It has 300 employees, up from 80 to 90 a year ago, and 14,000 customers.

Tender offers have become more common as an increasing number of startups choose to stay private longer. Other high-profile examples include payments giant , which has already undergone a few tender offers and is reportedly considering that could value it at more than $140 billion. Generative AI company is also believed to be working on its own at a valuation of at least $350 billion.

In Clay鈥檚 case, the motivation was twofold, according to CEO and co-founder . The tender offers have served as a way to allow new investors to come in, and for employees to feel like their equity is 鈥渞eal.鈥�

SA国际传媒 News recently spoke with Amin to dig deeper into the company鈥檚 decision to launch not just one but two tender offers in the past nine months. The interview has been edited for clarity and brevity.

SA国际传媒 News: Before we dig into the tender offers, tell us more about what Clay does.

Amin: We help businesses find and grow their best customers. You can think of Clay as an AI go-to-market tool which implements any creative idea you have for sales and marketing.

Go-to-market is just a new name for sales, marketing and customer success 鈥� the whole apparatus that helps you find customers and grow them, and implement any idea. Our vision is that in sales and marketing, you need to constantly be doing something different that’s unique for you, different from everybody else. Otherwise, it just becomes noise.

And we let you implement these strategies. It might be something like personalized landing pages to, 鈥淗ey, let’s analyze all the video calls with sales calls that you’ve had, figure out why you lost the customer, and put that into .鈥澨�1 I like to think of it as 鈥渓ike is for designers, Clay is for go-to-market teams.鈥�

So what drove you to do not just one, but two, tender offers over the past year?

It鈥檚 interesting actually to think of it as the inverse: Why not do a tender offer?

Two reasons you don’t do a tender offer is either you don’t have the demand, or you think you’ll demotivate the team. Because we’re growing super quickly, we have the demand, and people want to invest in the company because we’re extremely efficient. Our burn is very, very low.

We don’t actually need more primary capital. We haven’t touched the primary capital. So this is a way to allow new investors to come in. This is also a way to bring in new partners without diluting the whole cap table.

It鈥檚 also a way for employees to feel like their equity is real. And some employees are having some real-life events. People are getting married, people are having kids, and this allows them to be a little bit more comfortable and do things like buy a house or buy a car. There are a bunch of people who’ve told me they’ve worked in startups for 10 years and never gotten any liquidity, and this is their first opportunity.

People might only stay at a company because they want liquidity if they don’t like the culture 鈥斕� and they’re just withstanding it for the money. But we prefer people to stay because they want to do the work and they see that the value that they’re generating is real. I actually think it motivates the team.

Plus, it makes the ecosystem grow.

When you did the earlier tender offer, did you think you would be doing another one in less than a year鈥檚 time?听听

No, I don’t think that we were. The way I’m thinking about it is [it makes sense to do a tender offer] every time we hit certain milestones. So we hit $100 million ARR really fast (in December). Tender offers are a way to reward the team each time it performs to a level where we get to the next milestone for the company. I think it makes sense to allow some people to get some of the value that they’ve created.

Do you have an exit plan?

Sometimes even investors ask this question. And we don鈥檛. It is nonproductive to think about that. You’re only building this type of company if you want to see how big it can be. I always say it’ll be as big as it wants to be, and as long as there are problems for us to solve for customers. That’s what we should be focused on, and the valuations and the exits, those are things that are a result of that.

The other way to think about it is we’re basically close to being profitable all the time. Like we can choose to become profitable. (The company touts that it was cash-flow positive for parts of 2025, earning more in interest than it burned.)听 We want to be in a place where we have options.

Going public is a way to fund things so you can do more for customers. So I think whenever I start going down that line, I refocus back on, 鈥淚s there work to do for customers? Can we make the product better?鈥� And the answer right now is, yes, we’re nowhere near achieving our mission, which is how we help you finally grow your best customers. And as long as there’s work to do around that, we should keep doing it.

Do you think you’re going to be doing any more tender offers in the near future?

I think as long as we hit the next set of growth milestones, we’ll consider it. We鈥檙e still early in this. There are no exits on the horizon.

Related SA国际传媒 query:

Related reading:

• Q&A: Why Deep Tech Investors Are Turning To The Secondary Market For Liquidity
• Secondary Financings Offer Lifeline In A Slow Exit Market

Illustration:

Founded in 2013, San Francisco-based Celesta is focused exclusively on deep tech, built around the conviction that major technology shifts require innovation at the infrastructure layer. With assets under management of $1.1 billion, the operator-led venture firm has made 110 investments to date with 43 exits 鈥� an impressive exit-to-investment ratio.

Notable exits include chip company , AI processor , semiconductor company , drone systems company , and digital cell biology startup .

However, with startups staying private longer than ever, it鈥檚 clear that the secondary market is becoming an increasingly critical engine for venture, particularly in capital-intensive sectors such as deep tech.

Viswanathan sat down with SA国际传媒 News to discuss not only why the secondary market is accelerating now, but also how, in particular, that is impacting deep tech companies and where opportunity lies in deep tech in general.

鈥淐elesta has been doing deep tech from day one, and we were always investors in hardware and semiconductors and systems and the like,鈥� Viswanathan told SA国际传媒 News. 鈥淎nd so in a way, we’re thrilled that what we do is literally at the core of what the opportunities are and what people want to do.鈥�

The interview has been edited for brevity and clarity.

SA国际传媒 News: Why do you think the secondary market has been so active, and what’s driving demand?

And so the entrepreneurs struggle in trying to get their companies funded. We’re right now in a period where, thanks to AI and infrastructure on the data center side, there’s just an incredible amount of capital flowing into the innovation space. AI and healthcare and data center buildout 鈥� all of that is just exploding. As a consequence, what you’re finding is that there are fewer good companies to go after. And as a result, some of the more discriminating investors are looking for greater exposure and letting earlier investors get out.

You鈥檙e seeing early-stage venture capital firms that traditionally looked at M&A or public listing as an avenue. Now, I think there’s a substantial amount of secondary transactions that rival M&A, which is, I think, a good development because now you have a newer mix of investors, you have deeper-pocket investors coming in and providing the liquidity for the early investors.

Let鈥檚 talk about the secondary market as it relates to deep tech specifically.

Historically, secondary markets have been driven by larger investors looking for proven business models, proven cash flows, and a time to liquidity in the two- to three-year timeframe. Remember, the secondary players are really larger asset groups that have different return expectations than the earlier-stage investors.

But as it relates to deep tech, what’s happening is that there’s a feeding frenzy, because people see what happens in AI training. They think that a similar opportunity might exist in AI inference. At the same time, that is true.

In some cases, you’re going to see certain vertical applications get built, and in the secondary market, people that are taking a bet on the AI space are not really focused on revenue stream or cash flow. They’re looking to see if, 鈥淚s it a winner?鈥� It鈥檚 a take-all kind of market. And that we have seen happen in the LLMs. We have three large players now. It was one, but it’s unlikely that it will become 10.

I think the secondary market demand will also decrease in AI, over time. But it is different than the traditional secondary market investors who have focused on cash flow and revenue growth. That鈥檚 not what鈥檚 happening in AI.

Do you think this hot market is going to continue in the near- and long-term?

There’s always a reversal to the mean, as you would expect. Things always swing a little more than the equilibrium will support. As a result, you will find that there will be some froth. Valuations creep up. There’s more capital chasing it, and people are forgetting the back to basics, which are building a meaningful business, meaningful revenue, meaningful free cash, and all of that. And the hype cycle sets in. We may be in that period, in certain segments of the AI infrastructure buildout.

But we’re starting to see a dramatic improvement in how quickly a company can actually test its products. The time to revenue has shrunk dramatically, right? And the cost of development is also reduced dramatically. So when people talk about a one-person, billion-dollar company, you’re going to see a lot more of that, because the cost of innovation has really plummeted.

The flip side of that story is that the race to build out, clearly, is provisioning the supply side of the infrastructure to be in excess of demand in substantial cases. So the demand has to really catch up with the associated economics. And if the demand doesn’t catch up, overbuild happens. So I think we’re likely to see capacity in excess of demand. As it stands today, that’s going to be a pretty big problem. Deeper-pocketed investors are going to be able to sustain it, like the hyperscalers or the neocloud guys, but quite a bit of the other smaller players are going to really get a whiplash.

When it comes to deep tech, what other areas besides AI do you think are really interesting right now?

When I think about deep tech, of course, AI is the hottest space right now, but there are other deep tech sectors that are getting a lot of attention, such as biotech, for example.

We think there are three real broad sandboxes.

There’s a whole area of hardware systems, intelligence, infrastructure and data center AI 鈥� all of that physical hardware infrastructure that’s one sandbox, which is above and beyond just AI.

The second area is really the software layer, above and beyond the large language models or the frontier models. You can think of them as AI tools or AI software capability as an operating system, but on top of it rides a lot of applications and services and key verticals, such as healthcare, retail, diagnostics and supply chain. These are applications and services built on top of some very intelligent AI systems. That area is profoundly exploding. For instance, AI-assisted radiology, AI-assisted marketing and go-to-market strategies, AI-assisted financial services and looking at payment infrastructure.

And the third area is how biology is getting influenced by deep tech, whether it’s robotics, or advanced surgical capabilities, or diagnostics. You’re looking at miniaturization and manufacturing of complex systems, such as CT scan and Xray machines, and radiology equipment like ultrasounds 鈥� just all kinds of equipment that are getting enhanced with AI and the cloud as a connected device.

How do you think these prolonged hold periods are reshaping behavior for LPs, GPs and founders?

There have been these prolonged hold periods. Everyone wants DPI (distributed-to-paid-in capital). I saw this mug that said DPI is the new IRR. So everybody wants distributions earlier. And as a consequence, secondaries are a very important part of that market-clearing that has to occur.

Given the performance of the public markets 鈥� and the associated liquidity that people enjoy 鈥� there is a greater impatience by large investors to see traditional venture timelines get shrunk. The only way to do that is to leverage secondaries. So, there’s greater desire, greater opportunities and a greater impatience, which is in a way healthy, because you鈥檝e got to return money to the investor.

Now the flip side of that is that the public markets have had phenomenal growth over the past seven to 10 years. And you know, it’s arguable whether that’ll continue, so you’re going to see people get back to the early-stage illiquid asset class as an opportunity. But right now the public markets are very attractive. I would expect that to change over the course of time, but for now, that is actually bringing a healthy sort of expectation on distribution.

What do deep tech companies uniquely need in this environment?

Again, back to basics. You can’t continue to build on AI as a sector if you cannot show revenue growth, if you cannot show margin growth, if you cannot show scale. So the core technology by itself is necessary, but not sufficient. You have to have technology adoption supported by revenue growth.

For example, see what happened in SaaS. You know, people are paying 20x ARR and you鈥檇 be lucky if you got 5x to 7x ARR in a good market. That has changed. You鈥檙e going to see that in AI also. People are going to want to say: 鈥淪how me revenue growth. Show me profitability growth.鈥�

Related reading:

• A Conversation With Lead Edge Capital On Secondary Markets And Why It鈥檚 Holding Out On AI
• Q&A: Why Secondary Funds Still Can鈥檛 Keep Up With Investor Demand
• Secondary Financings Offer Lifeline In A Slow Exit Market

Illustration:

The warning signs were there. Now, years later, the consequences are materializing.

Many of those companies raised at sky-high valuations without ever achieving profitability. As cash reserves dry up, they are facing a harsh reality. Market multiples have contracted significantly, and those inflated valuations from 2021 are now a liability.

The consequences of inflated valuations

• Burning cash without a safety net: Companies that raised during the 2021 frenzy often expected follow-on funding at similar or higher valuations. But when that capital never came, they were left with aggressive burn rates and unsustainable cost structures. Many are now out of cash and scrambling to sell, often for a fraction of what they once claimed they were worth.
• Fire sales are replacing funding rounds: I now meet founders regularly who are exploring M&A not as a strategic exit, but as a last resort. These are not healthy companies looking to grow through partnerships. These are distressed startups trying to recoup whatever value remains. The market has corrected, but their cap tables haven鈥檛. The result is a mismatch between seller expectations and what buyers are willing to pay.
• Unit economics were ignored for growth: In the rush to grow fast and raise bigger rounds, many companies neglected the unit economics basics. Gross margin, CAC payback, dollar retention and profitability were sidelined in favor of valuations and top-line revenue. Now that the market is focused on sustainable growth, companies with weak unit economics are struggling to survive.

The AI wave is showing the same patterns

What worries me is that we are seeing the same dynamic play out today in the AI sector.

Early-stage companies are raising at valuations that assume future dominance, long before product-market fit or revenue. The technology is exciting and the potential is real, but history tells us that not all companies will emerge winners.

When the hype settles, those with sound business models and disciplined financials will remain standing. Others will be left dealing with down rounds, layoffs or worse.

What founders should focus on now

• Raise at a valuation that reflects your business, not the market trend: A modest, well-structured round sets you up for sustainable growth and realistic expectations in future financings. Chasing the highest number on your term sheet may feel good in the short term but often leads to long-term challenges.
• Plan for profitability, not perpetual fundraising: The best companies today are those that have built paths to breakeven. Founders should be laser-focused on extending runway, improving efficiency and demonstrating clear financial discipline.
• Avoid relying on momentum to carry you forward: Momentum helped companies raise easily in 2021. But when market sentiment shifts, only the fundamentals matter. Those who focus on building strong products with clear value and repeatable sales will be in the best position to raise, grow or exit at an attractive valuation.

is a strategic adviser to tech companies and investors, specializing in strategy, growth and M&A, a guest contributor to SA国际传媒 News, and a seasoned lecturer. Learn more about his advisory services, lectures and courses at . for further insights and discussions.

Related reading:

• Tech Revenue Multipliers Are Soaring. Should We Be Worried?
• Global Venture Funding And Unicorn Creation In 2021 Shattered All Records
• Don鈥檛 Raise VC Money Before You Understand Unit Economics

Illustration:

Within a few months of the August milestone, the board added another half-trillion-plus in value, an unprecedented increase, even when compared to the peak market of 2021 and early 2022.听 The rapid acceleration in unicorn values highlights the remarkable pace at which the AI sector is driving up revenue 鈥� and, in turn, valuations.

Much of the valuation surge on the board 鈥� which lists private companies valued at $1 billion or more 鈥� was driven by frontier model companies adding hundreds of billions in value, an analysis of SA国际传媒 data shows.

Notably, there was also an uptick in companies that reached decacorn valuations for the first time and notched significant jumps in value over their previous marks.

Reshuffling of the top 20

These valuation hikes were most noticeable in the 20 most highly valued companies on the Unicorn Board, which has undergone a major reshuffling at the top.

added $200 billion in the space of six months in early October after adding $143 billion in the prior six months. With a $500 billion valuation, the San Francisco-based startup is now the most highly valued company on the board, after it leapfrogged for the No. 1 spot.

SpaceX itself added $50 billion to its value in September, taking the Hawthorne, California-based company鈥檚 valuation to $400 billion.

, the fourth most highly valued unicorn after SpaceX and , added $121.5 billion in value in the space of six months, valuing the San Francisco-based company at $183 billion as of September.

Meanwhile, , another San Francisco-based company, added $38 billion in value within nine months, placing the company sixth on the board with a valuation of $100 billion. That ranks it just below China鈥檚 , which was valued at $150 billion in 2018.

Sydney-based design software maker added $10 billion in value in August in an employee share sale led by that valued the company at $42 billion.

New decacorns

Eleven companies have already joined the decacorn club in H2 so far 鈥� outpacing the half-year counts we鈥檝e seen since H2 2022.

Of the 11 new decacorns, the company that increased its value by the largest percentage was humanoid robotics company . The San Jose, California-based startup catapulted into the top 20 with a $1 billion funding at a post money valuation of $39 billion. That was up from its March 2024 valuation of $2.7 billion 鈥� marking a more than 1,300% increase in 18 months. The funding was led by New York-based , which also led Figure鈥檚 Series A funding in 2023. The company is building out humanoid robots for home and commercial work, and is investing in manufacturing and training its own AI model.

Another unicorn that posted a big valuation surge is cryptocurrency exchange , which raised $500 million at a $15 billion valuation in September. The San Francisco-based company was last valued in 2019 at $4 billion.

Many of these newly minted decacorns鈥� ratcheted up by more than $5 billion in less than a year. Along with Figure and Kraken, the following are other new decacorns that have emerged just since the start of the second half of 2025:

• France-based frontier model company was valued at $13.2 billion in a funding led by Netherlands-based chipmaker .
• San Francisco-based livestream shopping platform raised $225 million at $11.5 billion value led by and. Whatnot was last valued at $5 billion in January.
• Ring health tracker based in Finland raised $900 million at an $11 billion valuation led by Fidelity.
• New York-based , a commerce network for renters, raised $250 million at a $10.8 billion value led by and .
• Colorado-based quantum computing company , part of , raised $600 million at a $10.6 billion valuation led by .
• Palo Alto AI lab , focused on reasoning and code, raised听 $400 million at a $10.2 billion value led by . Cognition, last valued at $4 billion in March, acquired Windsurf in July.
• San Francisco-based connects human expertise for AI lab training. Mercor raised $350 million at a $10 billion valuation led by 1. Felicis also led its prior funding in February at a $2 billion valuation.
• Colorado-based , which is building AI datacenters, raised $1.4 billion at a $10 billion valuation led by and .
• San Francisco-based conversational customer experience AI startup raised $350 million at a $10 billion valuation led by .

In Q2, five companies joined the $10 billion-plus club. They include , , , and . (Perplexity has since raised multiple rounds to reach a value of $20 billion.)

Markets heat up

While the frontier AI labs are seeing the largest valuation increases, there are a greater number of companies this year joining the decacorn club, second only to counts seen in 2021. We find 82 private companies in the decacorn club as of October 2025 with more than a third that raised funding in 2025 to date. This pick-up in higher counts of new decacorns could be an indicator that the IPO markets warm up in 2026.

Related reading:

• The SA国际传媒 Unicorn Board
• SA国际传媒鈥檚 Global Unicorn List Tops $6T In Value In August For The First Time Despite Slowdown
• OpenAI鈥檚 $6.6B Secondary Share Sale Gives It Record $500B Startup Valuation, Topping SpaceX
• Unicorn Valuations Crest Higher
• Whatnot Lands $225M Series F, More Than Doubles Valuation to $11.5B Since January
• AI Talent Wars Heat Up As Cognition Scoops Up Windsurf After OpenAI Deal Falls Apart

Illustration:

In 2024, slightly less than half of planned, highlighting significant disruptions in the startup ecosystem due to market volatility and economic uncertainty.

Traditionally, IPOs have been pivotal exit strategies for venture-backed companies, enabling them to access liquidity and fuel growth. However, current market conditions have challenged their reliability, forcing many companies to reevaluate their paths to public markets. That鈥檚 why I鈥檇 like to delve into why companies are facing these challenges, but also how to adapt and explore alternative strategies.

Navigating delayed IPOs

Delayed IPOs significantly impact businesses, investors and employees. Market volatility, economic downturns and geopolitical tensions all create uncertainty, prompting companies to reconsider IPO timing and compressing the IPO window.

also deter IPO launches, as market corrections and heightened investor caution lead to diminished startup valuations. Regulatory scrutiny, with its evolving standards and stringent reporting requirements, adds another layer of complexity. Lastly, investor sentiment, whether bullish or pessimistic, directly influences IPO activity.

Stakeholders across the spectrum feel the pinch of delayed IPOs. Late-stage startups face funding shortfalls, while venture capital firms encounter extended timelines for their exits, complicating future fundraising.

Employees face consequences as well, as delayed IPOs affect stock option values, which are often central to their compensation packages.

Emerging risk profiles: valuation and financial risks

Delayed IPOs create a cascade of interconnected risks for startups. One of the primary concerns is valuation risk, where companies unable to meet their target IPO valuations may be forced into accepting down rounds. A down round means new financing occurs at a lower valuation than previous funding rounds, which can severely damage investor confidence.

This problem is compounded by a lack of liquidity; with IPOs delayed, investors face prolonged illiquidity, limiting their ability to capitalize on investment gains. This reduced liquidity strains investor patience and can pressure venture capitalists to seek alternative exit strategies, sometimes leading to hastened decisions.

Unfortunately, illiquidity also leads to significant financial risks. Startups reliant on IPO proceeds often face funding shortfalls and increasingly turn to debt financing. While this approach can temporarily ease cash flow pressures, it heightens financial vulnerability by increasing leverage and interest obligations, which may limit a company’s financial flexibility in the long term.

Moreover, these conditions can expose weaknesses in startups with unsustainable business models. Companies heavily dependent on continuous external funding may find their operational weaknesses starkly exposed when the IPO route is closed, risking insolvency or forced mergers and acquisitions at unfavorable terms without rapid adjustments.

IPO alternatives and risk management solutions

In this challenging environment, despite several companies kicking off roadshows, alternative exit strategies are becoming essential for startups. Mergers and acquisitions have gained prominence, with companies strategically aligning with larger entities to benefit from synergies, immediate financial returns and reduced market uncertainty.

Beyond M&A, other options have also emerged as viable paths to liquidity. For example, a direct listing allows a company to go public without issuing new shares, providing liquidity to existing shareholders without the typical IPO fanfare. Private equity buyouts also offer an by allowing a private equity firm to acquire a controlling stake in the company, providing an immediate exit for founders and investors.

Robust risk management solutions are also critical. Startups can proactively manage cash flow and anticipate funding shortfalls through accurate financial planning and forecasting. Streamlining operations, optimizing resource allocation and controlling costs can strengthen financial resilience, while detailed contingency plans ensure agility.

Additionally, comprehensive insurance solutions, such as directors and officers and errors and omissions coverage, protect startups and their leadership from financial and legal liabilities, maintaining stakeholder confidence amid uncertainty.

Best practices to avoid legal pitfalls

Directors and officers have fiduciary duties, which legally oblige them to prioritize the best interests of the company and its shareholders, ensuring responsible decision-making. Simply put, accuracy and transparency are crucial.

Regulatory compliance must be a priority. Failure to adhere to these regulations can result in significant legal and financial repercussions, undermining investor confidence and potentially jeopardizing the company’s future viability.

Companies should prioritize long-term sustainability and value creation, resisting pressures for short-term gains. By adopting these best practices, businesses foster investor confidence,, and ultimately position themselves for sustained success.

is the COO and co-founder of . Previously, he spent the first years of his career in roles across the venture ecosystem. From venture due diligence at to growth hacking and modeling for portfolio companies at to M&A negotiations at , he鈥檚 seen how companies succeed (and fail) from all angles. Niedbala is energized by the possibility of rethinking the way the insurance industry works through technology, best-in-class customer service, and cutting-edge marketing and branding. In 2021, Founder Shield joined , where Niedbala now leads digital product strategy and innovation.

Related SA国际传媒 query:

Related reading:

• 5 Companies Kick Off IPO Roadshow

Illustration:

Once upon a time, tech founders built toward IPOs 鈥� not tender offers. In 1999, the median tech startup went public just five years after its founding. Today, that figure has stretched to 14 years. Instead of ringing the opening bell, founders are increasingly turning to private liquidity, keeping equity locked in private hands long past the company鈥檚 breakout success.

That shift has created a far bigger 鈥� and increasingly private 鈥� pie. In 2005, the combined value of the 50 most-valuable private U.S. tech companies was less than $5 billion. Today, that number . Over the same period, private markets have matured from niche pools into deep oceans, with global private-market assets under management surpassing 鈥� up from just $100 billion in the mid-1990s, a 150x increase.

As a result, we鈥檙e entering an era where the most transformative value 鈥� like the impact projected from AI 鈥� could be created almost entirely within private markets, widening the wealth gap between insiders and everyone else.

The long-standing objections to broader VC participation 鈥� risk, illiquidity, transparency and fees 鈥� are rapidly losing relevance.

Let鈥檚 take them one by one.

鈥榁enture capital is too risky鈥�

Risk is not monolithic. Late-stage companies such as , or look far more like mid-cap public equities than garage-stage moonshots. Investors can capture meaningful upside and diversify against individual company blow-ups by thoughtfully constructing a portfolio of 30 to 40 late-stage (post-Series C) funding rounds.

鈥楤ut it鈥檚 illiquid鈥�

Illiquidity is relative. Half of U.S. public equities are already locked in passive funds that rarely trade. Meanwhile, the private secondary market hit a record $162 billion in transaction volume in 2024 鈥� and continues to grow. Publicly registered VC funds can also hold 20% to 30% of assets in stocks or Treasuries to meet redemptions, bridging short-term liquidity needs with long-term exposure.

鈥楾here isn鈥檛 enough oversight鈥�

That鈥檚 changing. New publicly registered, evergreen VC funds, like the Innovation Fund, are subject to filings, audited financials and daily NAV disclosures.

鈥楾he fees are outrageous鈥�

Historically, yes. 2% management fees plus 20% carry were the norm. But new models are emerging. The Fundrise Innovation Fund, for instance, owns equity in nine of the 10 most well-known private U.S. tech companies 鈥� including and 鈥� and charges no carried interest, only a flat 1.85% management fee 1.

So why democratize VC now?

Momentum is finally on the side of access. In June 2025, the House passed the in a 397-12 landslide, directing the SEC to open private markets to knowledgeable investors, regardless of net worth.

The scale of the opportunity is enormous. Missing out on a $20 trillion AI wave isn鈥檛 just unfortunate 鈥� it鈥檚 locking out the majority of Americans of a generation-defining creation of wealth. Private tech also provides diversification in an era when public portfolios are dominated by the 鈥淢agnificent Seven.鈥� And with 60% of public equity assets held passively, denying those same long-term investors access to private growth feels increasingly arbitrary.

Venture capital will always carry risk 鈥� but so did buying in 1997 or in 2015. What鈥檚 changed is the timeline: Today, the lion鈥檚 share of value is created before companies ever go public.

Publicly registered VC funds are a breakthrough. They pair regulatory oversight with access to innovation, offering everyday investors a chance to participate in the upside of early-stage growth. Just as ETFs transformed public markets, these vehicles could reshape the future of private capital.

The arc of innovation bends toward abundance. It鈥檚 time for venture finance to bend with it 鈥� toward the many, not the few.

is the CEO and co-founder of , the leading direct-to-consumer alternative investments manager.

• Breaking The Wealth Barrier: Why The SEC Should Redefine 鈥楢ccredited Investor鈥�

Illustration: