Silicon Valley’s hottest start-ups are finding ways to stay private for longer, dashing the hopes of investors waiting for blockbuster public listings to cash in on their assets.

A series of recent tech deals provided the biggest beginnings with billions of dollars in new capital to continue to grow and give employees a way to cash out valuable stock options – solving two of the main issues that have traditionally driven companies to going public.

Artificial intelligence and data analytics company Databricks raised $10bn in December, the largest venture capital fundraising round of 2024. That followed SpaceX’s $1.25bn raise in November, making it the world’s most valuable private start-up, and OpenAI’s $6.6bn haul in October.

“We operate as a public company already,” Databricks chief Ali Ghodsi told the Financial Times about the recent fundraising – a round so oversubscribed that he said investors offers $ 19bn. “Absolutely the earliest we’ll go public is (this year), but we’ve got some flexibility now.”

The deals put the spotlight on a new class of start-ups, often larger than their public market peers, with unprecedented scale and sophistication for private markets.

While small groups – including a number of private equity-backed start-ups – expected to take advantage of the strong US equity markets that will float this year, the biggest tech startups, especially those in AI, are under less pressure to follow suit.

They “have a lot of access to capital so large that there is no incentive that drives them to go public”, said Kelly Rodriques, chief executive of Forge Global, a market for the sale of private company stock.

Private markets have changed over the past few years. The seven largest private companies in the US are worth $695bn today, according to Forge Global, with SpaceX and OpenAI alone worth more than $500bn.

The emergence of a cadre of large venture firms enabled and capitalized on that expansion. A decade ago, it was rare for any VC to write a startup a check for $100mn. Now, some investors are willing to invest many times that number.

Josh Kushner’s Thrive Capital has invested more than $1bn in each of Databricks, Stripe and OpenAI over the past two years, part of a strategy that bears little resemblance to traditional venture investing.

The biggest 15 to 20 start-ups, including Databricks and Stripe, “effectively have their IPOs as private companies”, according to Mitchell Green, managing partner of Lead Edge Capital and an investor in Alibaba and Uber.

Having found ways to scale and provide ways to cash out their shares — a key weapon in the battle for talent — private companies have also avoided some of the more daunting aspects of going public. public.

“If you have a bad quarter you can get hammered for it, you can have activists,” said Luke Ward, an investment manager at Baillie Gifford which invested in SpaceX. “There’s an argument that some of these pioneering companies wouldn’t have been able to do what they did if they were in the public markets and there were short-term pressures.”

But examining the public markets can also be valuable, as private startups may have valuations that appear to be far removed from the strength of their corresponding businesses. The $47bn valuation of WeWork, which was raised during a round of funding led by SoftBank in 2019, fell after launching its roadshow ahead of a planned IPO, for example.

“It feels as if VC firms are in a parallel universe that has nothing to do with the real world,” said the head of investment at a US foundation that invests in many venture firms, who asked which shall not be named. “They have their own valuations, their own liquidity, which is self-made. It’s a parcel passing game.”

Far from the top tier of start-ups, few companies have gone public or are preparing to do so – though often for esoteric reasons.

ServiceTitan, a software company, listed on Nasdaq in December. The company’s decision to float was prompted by terms agreed to by its venture backers during a funding round in November 2022.

As part of that deal, led by private equity group TPG, ServiceTitan agreed to a “compounding IPO ratchet”. In fact, that sets a countdown to go public, ahead of which the company will have to list at a higher price or pay more in earnings to investors.

Some will be pushed to the public markets because they need to give early employees a way to cash out stock options before they expire or vest, where they are taxed as income.

Upcoming stock delivery dates have been a factor in many of the biggest IPOs of the past 18 months, including Instacart, Klaviyo and Rubrik. That hasn’t stopped their success, with each company’s shares rising significantly since their stock market debut.

That will encourage other fast-growing start-ups waiting to list, such as Dataminr, Netskope, CoreWeave and Klarna, according to Rodriques.

Currently, there is little demand for Silicon Valley’s top start-ups to begin the IPO process. “Databricks, Stripe, companies that can (access funding), they won’t go public in 2025,” said Kyle Stanford, lead VC analyst at PitchBook. “The first companies to come out are the ones that are forced. It’s a bunch of water-testers before it’s the $50bn companies.