As a highly profitable business, Malwarebytes didn't need capital for operations. Instead, its three major funding rounds (VC, crossover, PE) were used entirely for secondary transactions, providing liquidity to early founders and investors without diluting the company or adding cash to the balance sheet.

Investors can gain an edge by analyzing an IPO's S-1 filing, specifically the 'Use of Proceeds' section. If a company plans to use capital primarily to pay down debt or cash out early investors, it's a potential red flag. A stronger signal is when capital is reinvested into business growth.

Retail investors should view hyped IPOs not as a starting line, but as the finish line for early venture capitalists and insiders. These sophisticated players use the public market's excitement to cash out, leaving retail investors to bear the risk of post-IPO volatility and potential downturns.

The traditional purpose of an IPO—raising capital for company growth—is obsolete. Today, companies scale using private equity and only go public to allow early investors and insiders to cash out. This means the public market captures significantly less of a company's early, high-growth phase.

Secondary transactions can be a tool for growth-stage companies to optimize their capitalization table. They can provide liquidity to early-stage investors who need an exit while clearing space for new, larger institutional investors (like sovereign wealth funds) better aligned with the company's long-term future.

Most successful hard discount retailers like Aldi, Lidl, and BIM are privately held. Tiendas 3B's status as a public company is unusual, likely stemming from its founder's private equity background and initial capital needs. This provides a rare opportunity for public market investors to access this model.

For many large companies today, an IPO's primary purpose has shifted from raising growth capital—which is readily available in private markets—to creating liquidity for early investors and employees. The public offering acts as a valuation marker and an exit opportunity, not a funding necessity.

The number of founders taking secondary liquidity after their seed round is twice as high as the 2021 peak. While this de-risks the journey for founders, there is almost no parallel liquidity offered to early employees, creating a growing divide in early-stage risk and reward.

Contrary to popular belief, an IPO should not be viewed as a liquidity event. Instead, its primary value is in marketing and branding. It signals to the market, customers, and potential employees that the company is stable and "here to stay." The actual liquidity is often constrained by lockups and regulations.