Companies are staying private for over a decade, allowing early investors to capture the vast majority of growth. By the time they IPO, public market participants often serve as the final buyers, or 'exit liquidity,' rather than participating in early growth.

The traditional IPO exit is being replaced by a perpetual secondary market for elite private companies. This new paradigm provides liquidity for investors and employees without the high costs and regulatory burdens of going public. This shift fundamentally alters the venture capital lifecycle, enabling longer private holding periods.

In the 1980s, companies like Apple went public early as a fundraising necessity, allowing public investors to capture most of the growth. Today, robust private markets mean companies stay private longer, making IPOs primarily a liquidity event for insiders and VCs, with less upside left for the public.

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.

Historically, companies like Microsoft went public early, allowing public investors to capture most of their value growth. Now, firms like Anthropic stay private longer, IPOing at trillion-dollar valuations, meaning early VCs and insiders capture the vast majority of wealth creation, leaving less for 401k holders.

Unlike early tech IPOs where public investors captured enormous gains, today's blockbuster IPOs arrive at such inflated valuations that almost all value has already been extracted by private investors, leaving minimal upside for the retail market.

Due to the abundance of private capital, companies now go public much later in their lifecycle. The IPO has consequently become the final exit for insiders to cash out, leaving little upside for retail investors who are effectively buying at the peak.

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 trend of companies staying private longer and raising huge late-stage rounds isn't just about VC exuberance. It's a direct consequence of a series of regulations (like Sarbanes-Oxley) that made going public extremely costly and onerous. As a result, the private capital markets evolved to fill the gap, fundamentally changing venture capital.