As public markets struggle to attract high-growth AI startups and ambitious tech firms aiming to rival giants like Nvidia, unlisted AI ventures—including unicorns like OpenAI—are securing multibillion-dollar funding rounds at a pace and scale that far outpaces comparable US IPOs. Private equity firms have become the dominant financiers for these companies.
Recent data from PitchBook reveals that private funding deals worth $1 billion or more for unlisted startups and unicorns this year have doubled the number of similarly sized US IPO transactions. Since ChatGPT's global breakout in early 2023, the AI era has accelerated, with heavyweights like OpenAI (valued at $500 billion) and Databricks driving valuations skyward through massive private funding rounds—enabling many AI firms to bypass public listings altogether.
"These companies control their own IPO timelines—they could go public tomorrow if they wanted," said Chris Evdaimon, a private equity investor at Baillie Gifford. "Staying private offers advantages: either to fund loss-making segments toward profitability or to pursue larger M&A deals." Analysts note that for AI behemoths like OpenAI, the optimal IPO window aligns with peak valuation to maximize share pricing.
Year-to-date, US private equity and venture capital firms have led 21 funding rounds exceeding $1 billion, amassing $108 billion—dwarfing the $13.3 billion raised across 10 US IPOs of the same scale. Charts confirm private funding’s sustained dominance over IPOs in recent years. Unlike public offerings, VC investments involve negotiated, non-public equity placements without broad investor participation.
For OpenAI and peers like Anthropic (developer of Claude), IPO remains a secondary option amid the "AI cash burn" phase. Pre-profitability listings could hinder Wall Street’s valuation playbook. PitchBook notes AI startups now attract record VC allocations (62.7% in the US, 53.2% globally), putting 2025 on track to be the first year where over half of venture funding flows to AI. Yet most capital targets mature AI firms, leaving lesser-known innovators struggling.
Investors have grown "highly selective," funneling focus exclusively into AI—a stark contrast to the pandemic era when unprofitable ideas rushed to IPO. In 2021, US IPOs saw 32 $1B+ deals versus 21 in private markets. Today, AI startups favor remaining private as investors bankroll growth pre-profitability. Secondary share sales also surge, allowing early backers and employees to cash out pre-IPO.
OpenAI’s recent $500B valuation via employee stock sale—surpassing SpaceX as the world’s most valuable startup—highlights this trend. Despite restructuring for a future IPO (which could rank among history’s largest), timing remains strategic.
Wall Street bankers, including Evdaimon, predict high-value AI firms will eventually go public—but only when founders can balance business focus with freedom from quarterly scrutiny. "Private markets are funding growth now," he noted, citing Klarna’s 20-year journey before its September IPO (2024’s second-largest US listing).
Performance among $1B+ IPO startups has been mixed: while the weighted average return (~40%) doubled the S&P 500’s, four stocks trade below offer prices. Standouts include Circle Internet Group (265% gain) and CoreWeave (near-tripling post-IPO). For giants like Stripe, public listings remain distant—but inevitable. "They’ll IPO at their strongest moment," Evdaimon concluded, "not just timing markets, but their own evolution."