The news: The bloom may be off the rose for high-flying tech startup IPOs as big names turn instead to private funding rounds.

• Industry titan OpenAI secured a mammoth $6.6 billion in the fall, while Perplexity closed about $500 million of funding for its generative AI (genAI) search engine.
• Databricks raised $8.6 billion in December—its 13th funding round so far—and Stripe raised about $642 million.

Zooming out: The tech IPO market began to rebound last year, including prominent listings from Reddit and ServiceTitan.

However, some big names are holding out due to gaps between public and private valuations, per Renaissance. Despite SpaceX’s $350 billion valuation, for example, its recent $1.25 billion funding round signals the company is nowhere near considering a public listing.

“If SpaceX, Stripe, and Databricks are any sign, hot AI tech unicorns like OpenAI and Anthropic can stay private indefinitely,” Renaissance senior strategist Matthew Kennedy said.

Close to the vest: While going public can bring substantial new capital, it adds a slew of public reporting and disclosure requirements from the Securities and Exchange Commission (SEC).

• Contentious issues with publishers and the competitive AI market could be dissuading some tech companies from putting all their cards on the table: Revealing details of training data could be an anxiety-inducing move for those facing allegations of content theft and data scraping.
• Keeping a company private could also help companies maintain their competitive edge by safeguarding models’ algorithms and prompts.

Ups and downs: AI is also unpredictable—and extremely expensive.

• Even OpenAI is losing money on its products, a fact that the company appears fine with but one that could create animosity with shareholders if OpenAI went public.
• The timeline and potential for returns on AI investments remain unclear, and as investor spending surges, tangible financial results are in demand.

Our take: Going the private fundraising route is a financial decision but may also be a marketing-driven decision to protect companies’ competitive edge and brand integrity.

While this loosens the leash on showing quick financial returns on tech innovations, relying on big-name private investors could limit flexibility in partnerships and business decisions down the line.

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