The Rise of Private Growth: Why IPOs Aren't What They Used to Be

Here's the thing: I've noticed a shift in how we're viewing IPOs today. It's becoming clear that the biggest growth opportunities aren't happening when companies go public, but long before that. Cathie Wood, known for her strategic insights and successful investments, has pointed out that the real action is in the pre-IPO phase.

The Deep Dive into Private Growth

ARK's analysis shows that companies are staying private much longer. On average, U.S. companies now take 12 years to go public. That's up from just five years back in 1999. So why the delay? Two major factors are at play.

First, there's the 2012 JOBS Act which increased the shareholder limit from 500 to 2,000, allowing companies to stay private longer. This means firms don't have to rush into public markets for capital. Second, the availability of deep private funding means these companies can mature and reach substantial sizes without listing.

Take SpaceX, for instance. The company has filed for what could be the largest IPO in history at $75 billion. But the real story is that its valuation soared long before this filing. And this isn't speculation. Arithmetic shows the same pattern across other firms like OpenAI and Anthropic, which have hit massive valuations while still private.

Broader Implications for Markets

What's this mean for the market? It appears the public is missing out on some of the steepest growth phases of these companies. With firms like SpaceX, OpenAI, and Databricks achieving scale before an IPO, only those with private access are reaping the rewards early.

For the crypto market, this shift to private growth is particularly interesting. Many crypto projects have used the ICO model to raise funds without going public in the traditional sense. Could this trend in private growth inspire similar strategies in crypto? It seems likely.

Who are the winners and losers here? Private investors and venture funds holding these companies privately can capitalize on significant pre-public growth potential. Regular retail investors, however, might find themselves locked out of these opportunities until the companies go public, often at already inflated valuations.

Conclusion: What to Do with This Info?

So, what's the play here? If private growth is where value creation is happening, how can retail investors get in on the action? One route could be participating in platforms that offer access to private company shares, though these are often limited and require accredited investor status.

Alternatively, staying informed and investing in ETFs or funds that focus on innovation and early-stage companies might offer indirect exposure. But here's a thought: should regulations evolve to give broader access to these private opportunities? If the most exciting growth is happening before public listings, maybe it's time to rethink the barriers currently in place.

The data is unambiguous. As companies continue to grow exponentially in private markets, the need to adapt our investment strategies becomes more pressing.