The problem with mega IPOs

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1. Key Themes

Theme 1: Mega IPOs Could Crowd Out the Rest of the VC Ecosystem

Three AI/space companies — SpaceX ($1.25T), OpenAI ($840B), and Anthropic ($330B) — are eyeing 2026 public listings that could collectively dwarf all prior VC-backed IPO history.

"Together, they could raise more than $100 billion in proceeds and would generate a total exit value higher than all US VC-backed IPOs since 2000."

The concern isn't that these IPOs won't succeed — it's that they will suck all the oxygen out of the market for everyone else. Underwriters will be stretched, public capital absorbed, and any post-listing stumble could freeze the window for all other companies well into 2027.

"The gravitational pull of these mega-listings will undoubtedly impact the growing herd of other VC-backed unicorns hoping for their own liquidity moment. Underwriters will be stretched. Public market capital will be absorbed."

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Theme 2: VC Liquidity Crisis Is at a Four-Year Breaking Point

The VC market hasn't generated meaningful distributions in years. LPs are demanding returns, unicorn valuations are stagnating, and the IPO pipeline remains thin heading into 2026.

"The VC market is already four years deep into a liquidity drought. LPs want distributions, and unicorn valuations are stagnating."

Kraken pausing its IPO plans — despite being a high-profile, well-capitalized crypto exchange — signals that even willing issuers are hesitating given macro and geopolitical headwinds.

"Crypto exchange Kraken is now pausing its own listing plans, according to CoinDesk."

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Theme 3: AI Is a Systemic Portfolio Risk, Not Just an Opportunity

UC Investments CIO Jagdeep Singh Bachher issued a portfolio-wide warning: AI isn't just a sector bet — it's an existential threat to legacy holdings across every asset class. The message is to actively audit every position for AI vulnerability, not just chase AI upside.

"Let's not get caught with legacy assets that might lose their edge very quickly," he said, citing the collapse of software stock prices."

Bachher frames AI as the fastest-moving major technological shift in history, demanding proactive reallocation rather than passive observation.

"It has become clear over the past 60 days that AI represents 'the biggest technological revolution at the fastest pace' in history, and that his staff has to drill down into every investment to identify what could be at risk."

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Theme 4: VC Deal Activity is Recovering, but Concentrated Among Winners

For the first time since 2022, VC deal activity is running ahead of its historical trend line — a genuine recovery signal. However, the Southeast Asia data reveals a bifurcation: fewer companies are raising, but those that do secure larger rounds.

"For the first time since 2022, deal activity is now running ahead of its historical trend line, according to a new PitchBook research report."

The median VC deal value jumped from $2.7M to $4M in Southeast Asia from 2024 to 2025 — despite declining aggregate deal count. Capital is concentrating in perceived category leaders.

"Investors are reserving capital for perceived category leaders rather than dispersing smaller checks broadly across the ecosystem." (PitchBook Chart of the Day commentary)

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Theme 5: Defense & Aerospace is an Emerging Private Credit Opportunity

Military spending elevated by the Iran conflict is creating tailwinds for borrowers in aerospace and defense — a sector historically underrepresented in private credit markets.

"Aerospace and defense is not a major part of the private credit market, but the space is not ignored by direct lenders and sponsors, and many borrowers are set to benefit from elevated spending and ongoing military action in Iran and neighboring states."

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2. Contrarian Perspectives

Contrarian 1: Mega IPOs May Actually Harm Broader VC Returns

The conventional wisdom is that blockbuster tech IPOs are unambiguously good for venture. The article challenges this, arguing the concentration of capital, underwriter attention, and LP liquidity into just three companies may actively crowd out hundreds of other unicorns.

"It would be a triumph for venture capital. It would also create challenges for other companies looking to go public, keeping distributions for the year concentrated in a relatively small subset of investors."

Evidence: Already, no major IPOs occurred in January or February 2026. Kraken — a credible, well-backed company — paused its listing. Companies already public from 2025 vintages are underperforming.

"Already, the VC-backed companies that went public last year are not trading so well in the current market, which is still under pressure due to macroeconomic and geopolitical factors."

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Contrarian 2: AI Infrastructure May Be Overbuilt — Even at UC Investments

The UC CIO simultaneously champions AI's long-term inevitability while acknowledging it may be substantially overvalued today. This is a notably nuanced position from one of the largest institutional investors in the world.

"Bachher acknowledged the possibility that AI businesses are overvalued and that too much infrastructure is being built to meet current demand, but says that over a 30-year time horizon, the direction of travel is one way."

This mirrors the UC approach to private assets generally — they hold $40B in private assets but have deprioritized alternatives in recent years, citing valuation concerns.

"'We like private assets for diversification, but we certainly don't drink the Kool-Aid,' Bachher said in November, citing concerns around 'frothy valuations' in private credit."

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Contrarian 3: The 2026 IPO Window Could Close Before Most Unicorns Get Through It

Most market commentary frames 2026 as the long-awaited IPO recovery. The article warns this is dangerously optimistic for the broader unicorn herd. If the mega-three falter post-listing — as Alibaba, Meta, and Uber all did — the window could slam shut again.

"If any of these giants stumble post-listing—as Alibaba, Meta and Uber all did in their early months as public-traded companies—the chill could mean the broader IPO window closing until well into 2027."

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3. Companies Identified

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4. People Identified

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5. Operating Insights

Insight 1: Fundraising Infrastructure Should Be Built Before You Need It

The Fidelity Private Shares sponsor section highlights a consistently underrated point: founders fail fundraising not because of weak vision, but because of operational unpreparedness — scattered cap tables, no investor update cadence, last-minute diligence scrambles.

"Most founders don't struggle with fundraising because of vision or ambition. They struggle because the mechanics are unclear, fragmented, and learned too late."

Tactical takeaway: Build a clean cap table, standardized investor update template, and a pre-assembled diligence package before you're in market. Treat it as always-on infrastructure, not a one-time pitch exercise.

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Insight 2: Portfolio Managers Must Conduct Active AI Vulnerability Audits

Bachher's directive to his team — to examine every holding for AI disruption exposure — is an operating protocol that any fund manager or operator should replicate. Passive monitoring is insufficient given the pace of change.

"His staff has to drill down into every investment to identify what could be at risk."

Tactical takeaway: Create a systematic AI exposure review for every portfolio company or business unit — mapping which workflows, revenue streams, or competitive moats could be compressed or eliminated within a 12–36 month horizon.

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Insight 3: In a Bifurcated Market, Position Yourself as a Category Leader Early

The Southeast Asia VC data reveals a structural shift: aggregate deal volume is falling but median deal sizes are rising sharply. Investors are concentrating capital in fewer, more dominant players.

"Investors are reserving capital for perceived category leaders rather than dispersing smaller checks broadly across the ecosystem."

Tactical takeaway: For founders and operators, the strategic imperative is to establish clear market leadership signals (revenue scale, customer logos, product differentiation) before approaching investors. Being a strong #2 in a category is significantly less fundable than it was three years ago.

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6. Overlooked Insights

Overlooked Insight 1: The UK is Quietly Building an Alternative to the Traditional IPO Path

While US markets debate whether the IPO window will open, the UK launched its Pisces regulatory framework — a structured private stock trading market. VC-backed QPlay became the first company to trade on the JP Jenkins Private Market under this framework.

"The UK's private stock market experiment has begun. VC-backed QPlay started trading on Wednesday on the JP Jenkins Private Market, under the newly established Pisces regulatory framework."

This is an early but significant signal: if the traditional IPO path remains congested or volatile, alternative liquidity infrastructure — regulated private markets — may emerge as a parallel exit channel, particularly for European founders and investors.

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Overlooked Insight 2: Apple is Quietly Clamping Down on AI-Native App Development

Buried in the "Side Letters" section is a note that Apple is restricting "vibe coding" capabilities — AI tools that allow users to write or modify app code — in its App Store, citing rule violations.

"Vibe coding capabilities violate App Store rules, the company says, creating another standoff with app developers."

This is an underappreciated platform risk for founders building AI-native consumer apps on iOS. Apple's gatekeeping posture toward AI-generated code could materially constrain the go-to-market strategies of an entire class of startups that assumed App Store distribution as a given.