If you just looked at headlines, you’d think the IPO market reopened in 2025.
Technically, it did. But economically, it didn’t.
What we saw was not a return to form, but a controlled release of supply into a market that is still repricing venture-backed companies after the excesses of 2020–2021.
The Snapshot: Activity Without Strength
15 meaningful venture-backed IPOs
$10.4B raised
Only 4 trading above IPO price
11 underwater
Median return: -48.7%
Zooming out:
~216 total US IPOs raising ~$47B
Capital heavily concentrated in a handful of larger deals
Weak aftermarket performance across the majority of issuers
This is not what a healthy IPO window looks like. Historically, reopenings are broad-based with positive momentum across cohorts. In 2025, the opposite happened: activity returned, but outcomes deteriorated.
The key signal is not issuance volume—it’s post-IPO performance. And that performance suggests demand remains highly selective.
$87B of Value Destruction
Examples highlight the magnitude:
Figma: +250% day one → now -82% from peak
Circle: +199% → the only consistent outperformer
Gemini: $7B → $0.5B (-93%)
Klarna: $45.6B → -89%
Chime: $25B → -72%
StubHub:Â -74% with $2.85B of debt
Navan: broke IPO price day one → never recovered
This is not idiosyncratic underperformance. It is systemic repricing.
That $87B represents years of optimistic private market underwriting being reconciled in a single event. In prior cycles, this adjustment might have occurred gradually through down rounds or structured financings. In this cycle, the IPO itself became the moment of truth.
The Mechanics: Public Markets Reprice Everything
The most important shift is how public markets are underwriting risk.
Across the cohort:
Revenue multiples compressed ~50–70%
Growth expectations revised down 20–40%
Profitability timelines pulled forward 2–3 years
Public investors are now pricing:
Higher cost of capital
Lower tolerance for duration risk
Greater emphasis on cash flow visibility
This is not a temporary correction. It reflects a structural shift in how growth is valued.
Under ZIRP, capital was abundant and future cash flows were discounted lightly. That allowed companies to trade on narrative, scale, and optionality. Today, those same cash flows are discounted more aggressively, and optionality is no longer priced the same way.
Why This Happened
1. The ZIRP Hangover Cleared
The 2020–2021 environment was defined by:
Near-zero interest rates
Unlimited growth capital
Minimal accountability on profitability
Companies optimized for growth because that is what the market rewarded.
By 2025:
Rates normalized
Liquidity tightened
Capital became selective
This is not just multiple compression—it is a reversal of the incentive structure that defined the last cycle.
2. Private Markets Lagged Reality
Private markets move slowly:
Infrequent price discovery
Insider-led rounds
Valuation smoothing
Public markets move instantly:
Daily pricing
Real-time comps
Full transparency
The IPO became the first true mark-to-market event.
This explains why so many companies saw immediate dislocations post-listing. They were not declining—they were being repriced to reality for the first time.
3. Liquidity Pressure Forced the Cycle
The IPO backlog mattered.
Thousands of companies delayed exits from 2022–2024
LPs became over-allocated to private markets
DPI across funds remained historically low
This created system-wide pressure:
GPs needed distributions
LPs needed liquidity
Companies needed exit pathways
As a result, IPOs happened not because conditions were ideal, but because they were necessary.
When supply is driven by necessity rather than strength, pricing power shifts to buyers. That dynamic defined much of the 2025 IPO class.
4. AI Created a Two-Tier Market
AI introduced a new benchmark for capital allocation.
AI infrastructure and semiconductors saw multiple expansion
Non-AI SaaS, fintech, and consumer companies saw continued compression
The result is a bifurcated market:
AI = premium multiples, strong demand
Everything else = discounted, scrutinized
This is less about hype and more about opportunity cost. Investors now have a clear alternative where growth, margins, and long-term narratives align. That raises the bar for every other category.
What the Data Actually Says
Growth Alone Is No Longer Enough
Companies with strong top-line growth but weak margins underperformed. Companies with moderate growth and strong unit economics held up better.
This is a fundamental change in valuation drivers.
IPO Is No Longer a Liquidity Event
Historically, IPOs provided:
Immediate valuation step-ups
Early investor liquidity
Momentum-driven upside
Now, IPOs represent:
Valuation resets
Constrained liquidity (lockups, weak aftermarket)
Continuous public scrutiny
For many companies, the IPO price is the lowest valuation they’ve seen in years.
Venture Marks Are Losing Relevance
One of the most important implications for VCs:
Markups are not translating into DPI
Exit multiples are lower
Time to liquidity is longer
This is forcing a return to fundamentals in how funds are evaluated.
Implications for Founders
If you are building toward an IPO:
Your last round valuation is not your benchmark
Public comps matter more than private comps
Efficiency is now embedded in your multiple
Practically:
Burn multiple matters
Gross margin matters
Retention matters more than growth
The companies that adapt early will be the ones that successfully bridge private and public expectations.
Implications for VCs
This cycle is forcing discipline:
Entry price matters again
Reserves strategy matters more
Portfolio construction must assume lower exit multiples
The biggest shift is philosophical:
Funds that cannot convert paper gains into distributions will struggle to differentiate.
The Bigger Picture
Globally, IPO activity has returned:
1,200+ IPOs worldwide
Capital is flowing again
Institutional demand is stabilizing
But the rules have changed.
This is no longer a market driven by:
Momentum
Narrative
Cheap capital
It is a market defined by:
Selectivity
Discipline
Real outcomes
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