Private equity promotes AI unicorns as the strongest "blood transfusion pump"! The size of US stock IPOs is being overwhelmingly dominated by massive private placements.

In the public fundraising market, it is difficult to attract fast-growing artificial intelligence start-ups and small-scale technology companies with ambitions to rival tech giants like NVIDIA. At this time, AI start-ups that have not gone public, as well as unicorns like OpenAI, are raising funding rounds in the tens of billions of dollars, faster and on a larger scale than companies opting for IPO in the US stock market. Private equity firms are providing large funds to these unlisted AI start-ups. According to the latest data compiled by PitchBook and other institutions, this year, for unlisted ordinary start-ups and unicorns valued at $1 billion or more, the number of funding transactions is twice that of IPO funding transactions for equivalent capital on the US stock market. Since the global popularity of ChatGPT in early 2023, human society has gradually entered the AI era. With heavy private funding rounds pushing up valuations of global "AI super unicorns" like OpenAI valued at up to $500 billion and AI data platform leader Databricks, more and more AI start-ups are able to secure the funding they need without going public. "All of these companies, whether or not to go public, entirely depends on themselves, and they can even choose to IPO as early as tomorrow," said private equity investor Chris Evdaimon from Wall Street asset management company Baillie Gifford. "By remaining private, they benefit in various wayseither because some parts of their business are still in the red and they want to invest funds to make those parts profitable, or because they want to engage in larger-scale acquisitions." Some private equity analysts suggest that for "AI giants" like OpenAI with valuations in the hundreds of billions of dollars, the best time to go public through the stock market IPO is often at the peak of the company's development in order to maximize shareholder value. Overall, according to PitchBook statistics as of November 4, this year has seen 21 funding transactions led by US private equity companies or venture capital firms raising over $10 billion each, totaling an astonishing $108 billion. In comparison, third-party statistics show that this year there have been 10 US IPOs raising funds at that level, with a total of only about $13.3 billion raised. As shown in the chart above, in recent years, large private funding rounds in the US have even surpassed IPOs. Typically, Silicon Valley venture capital firms invest in equity of unlisted companies through private negotiations and targeted capital injections, not open to all public investors like an IPO, and not publicly listed on stock exchanges, making it essentially "private equity financing." For "OpenAI" and others, IPO is not the first choice For AI super unicorns like OpenAI and developers like Anthropic, going public through an IPO is not conducive to driving the so-called "valuation lifting" movement on Wall Street, as they are still in the stage of "AI burning money". Therefore, going public through an IPO before achieving a balance between profits and losses is not the most sensible choice. PitchBook statistics show that in the last quarter, the percentage of VC funding received by AI start-ups reached a historical high interval (about 62.7% in the US and about 53.2% globally), undoubtedly pushing 2025 towards the first year in history where "over half of venture capital funding flows to AI". However, most of the funding goes to large-scale and mature AI start-ups, while some lesser-known AI rising forces, especially those not focusing on artificial intelligence, are struggling, making it difficult to secure funding. PitchBook said that limited partners of venture capital funds and partners of venture capital firms are "more cautious in allocating funds" and are "fully focused on the AI field." The current activity contrasts starkly with the period of the COVID-19 pandemic, when any innovative yet unprofitable companies would choose to go public. In 2021, the number of IPO funding activities in the US stock market raising $1 billion or more soared to 32, whereas there were only 21 private funding rounds at that level. Currently, many AI start-ups tend to remain private for reasons such as private equity firms being willing to support their growth with funding until they become profitable, in order to acquire shares in these start-ups. Another driving factor is the increasing number of significant equity transfers within private organizations, giving long-term supporters and employees the opportunity to cash out profits before an IPO. Just last month, OpenAI provided a staggering example: the start-up coordinated an employee stock sale with a valuation of $500 billion, surpassing Elon Musk's SpaceX and becoming the world's highest-valued start-up. Nevertheless, the company recently underwent a major restructuring of its business to pave the way for a future listing on the American stock market, which, based on current valuations, would make it one of the highest-valued IPO listing companies in US stock market history. IPO remains the ultimate destination for AI unicorns Top bankers and investment institutions on Wall Street, including Evdaimon, suggest that high-valued AI start-ups are likely to go public at some point, but the ability to focus on expanding specific businesses or freely spending money without facing public scrutiny and criticism during earnings conference calls remains a preferred funding path for many founders. "At the moment, the private market is footing the bill for growth," Evdaimon said. As private equity firms age and focus more on specific businesses, this becomes increasingly evident. Take, for example, Klarna Group Plc, a fintech company that went public after nearly twenty years in September of this year, becoming the second largest IPO in the US stock market this year. For start-ups raising over $1 billion through IPOs in the US, the performance is mixed. Although the weighted average return is about 40%, doubling the return rate of the S&P 500 index, four stocks have seen their prices fall significantly below the offering price. This overall performance is mainly driven by the stablecoin issuer, Circle Internet Group Inc., with a 265% increase, and the AI cloud computing platform, CoreWeave Inc., with nearly triple the stock price performance and known as the "son of NVIDIA". For large private companies like Stripe Inc. that have not yet gone public, whether on the New York Stock Exchange or NASDAQ, it seems that the time for listing is not imminent, but Evdaimon expects that these largest unicorns will eventually inevitably move towards an IPO. "They are just choosing their timing to maximize IPO proceedsgoing public from a position of strength, not just timing the market like stock speculation, but based on the stage of their own development," Evdaimon said in an interview.