Increase in IPO market from Circle 500% Surge, VCS says the drought may be over

For over three years, venture capital companies have been waiting for this moment.

Tech IPOs were virtually suspended in early 2022 due to rising inflation rates and rising interest rates, but large-scale acquisitions were largely off the table as increasing scrutiny of regulations in the US and Europe drove potential buyers.

It’s too early to say those days are completely in the past, but the first half of 2025 showed signs of momentum, with June in particular generating much needed returns for startup investors in Silicon Valley. Overall, there are five Tech IPOs, accelerating from the two averages of the month since January, according to data from CB Insights.

It was the crypto company that emphasized the group. RoundIt more than doubled with its debut on the New York Stock Exchange on June 5th, and now it’s six times higher than IPO prices at a market capitalization of $42 billion. Stocks received a major boost in mid-June after the Senate passed the Genius Act.

Venture Firms General Catalyst, Breyer Capital and Accel have combined $8 billion worth of circle stock, even after selling some of the offerings. Silicon Valley Stalwarts Greylock, Kleiner Perkins and Sequoia Capital are expected to immediately benefit from Figma’s IPO after the design software vendor filed a public prospectus on Tuesday. Since the $20 billion acquisition agreement Adobe Discarded in late 2023, Figma is one of the most anticipated IPOs at Startupland.

Regarding the exit environment, Eric Hippeau, managing partner at early stage venture Lerer Hippeau, said: “I’m not sure if I’m sure this will still be a sustained trend, but it was very encouraging.”

Over the past few months, another positive indication for the industry has been the performance of artificial infrastructure providers coreweaveIt was released in late March. Stocks were relatively stagnant for the first month on the market, but rose 170% in May and another 47% in June.

For venture companies that have long considered the lifeline of risky high-tech startups, IPOs are essential to generating profits from university contributions, foundations and pension funds that allocate a portion of their capital to asset classes. Without handsome returns, there is little incentive for a limited partner to put money into future funds.

After a record year in 2021, the US venture support IPO raised $60.4 billion, according to data from Professor Jay Ritter, a professor of finance at the University of Florida. There were 13 such offerings in 2022, followed by 18 and 30 last year in 2023, raising $13.3 billion, Ritter data shows.

The slowdown follows the 2022 Federal Reserve aggressive fee hiking campaign, which aims to slow down crippling inflation. As the slow growth environment extends to its second and third years, venture companies are putting pressure on investors to return cash.

In the 2024 yearbook, the National Venture Capital Association said that even if the US VC exit value increased by 34% last year to $98 billion, that number is less than half the average for the four-year period from 2017 to 2020. NVCA and Pitchbook.

“This liquid drought backlog is at risk of creating a ‘zombie company’ cohort. This is a company that generates operational cash flow, but lacks reliable exit prospects,” the report said.

Apart from Circle, the latest yields for IPOs are primarily composed of small and lesser known brands. Health Technology Company Hinge Health and Omada Health They are valued at approximately $3.5 billion and $1 billion, respectively. Etrothe online trading platform has a market capitalization of just $5 billion. Online Banking Providers Chime Financial It has a higher profile, primarily due to its year-long marketing blitz, valued at nearly $11.5 billion.

Meanwhile, the best private companies like SpaceX, Stripe and Databricks remain on the sidelines, with AI Highfliers Openai and humanity continuing to raise a ton of cash, not intending to make it public anytime soon.

Still, venture capitalists told CNBC that many companies with financial metrics are publicly available, and many of them are preparing this process.

“The IPO market is beginning to open and the VC world is cautiously optimistic,” said Rick Heitzmann, a partner at New York venture Firstmark. “We’re preparing companies for our next public offering.”

There are other ways to make money in the meantime. Secondary sales, a process that involves the sale of individual stocks to new investors, is on the rise, allowing early employees and investors to gain some liquidity.

And there’s something Mark Zuckerberg does. He tries to position his company at the heart of AI innovation and development.

last month, Meta In exchange for poacher Alexandre Wang and his small group of top engineers, he announced a $14 billion bet on scale AI, which acquired a 49% stake in the AI ​​startup. The agreement effectively acquired half of the stock held by investors, leaving them with the opportunity to make money on the remaining holdings if a future acquisition or IPO was made.

The deal is a big win for Accel, who scales AI’s Series A round in 2017 and is ready to win over $2.5 billion in the deal. Index Ventures led Series B in 2018, while Peter Tiel’s Founders Fund led Series C the following year with a valuation of over $1 billion.

Investors are currently hoping the Federal Reserve will move into a fee-cutting campaign, but the central bank has not committed to one. There is also the continued optimism that regulators will be more burdensome when they are made public. Last week, Reuters reported that US stock exchanges and the SEC discussed easing restrictions to make IPOs more attractive, citing sources familiar with the issue.

Mike Belin, who heads US IPO practices at consulting firm PWC, said he hopes for diversity in IPOs across the sector later this year. Pharma and Fintech were one of the most active sectors of trading by the end of May, according to PWC data.

Recent trends in IPO activities are encouraging signs for investors, but potential obstacles remain.

Tariffs and geopolitical uncertainty delayed IPO plans from businesses, including Klarna and StubHub, in April. Neither of them provide up-to-date information on when they are scheduled to debut.

Firstmark’s Heitzmann said the path to advance is “not quite clear,” adding that he wants to see a strong quarter of economic stability and growth before confidently saying the market is open.

Plus, aside from CoreWeave and Circle, there were no big pops in recent Tech IPOs. Hinge Health, Chime and Etoro have seen relatively modest profits from the offer price while Omada’s health is declining.

But in effect, it wins what the VC has been experiencing over the past few years. Overall, Hippeau said recent IPO trends are generally encouraging.

“There’s a kind of light starting to begin at the end of the tunnel,” Hippo said.

Watch: VC-backed startup trading rise