In the US, venture-backed private companies outnumber public companies 8 to 1. This wasn’t always the case. And we’re probably not going back.
In 1996 there were more public companies than VC-backed private companies in the US.
The market is expecting more VC-backed company exits next year, leading to an interesting thought experiment: what would it take for the ratio of private-to-public companies to get back to parity? Is it even possible?
First, some context:
- The number of publicly listed companies in the US has declined from 8,000 in 1996 to 4,300 in 2024, as identified by Apollo Global Management, Inc.
- Over the same time, the number of VC-backed private companies rose from roughly 4,000 to 36,000; Caplight estimate using data from PitchBook, Carta, and our own.
Why the increase in VC-backed companies?
This is well covered, but summarized here:
🤖 Technology advancements = From the internet to the iPhone to AI, 2+ decades of rapid innovation demanded funding.
📉 Low interest rates from 2009 - 2021 = Increased attractiveness of risky assets, including VC.
⚖️ JOBS Act in 2012 = Ability for companies to take on more private investors and push off the need to go public.
💰 Explosion in VC fundraising = $926B raised in the last 10 years with $328B dry powder, that’s more than double the ~$400B raised from 2005 - 2014, according to PitchBook.
⚠️ Also, and maybe most importantly… being a public company is hard! If you’re building something innovative, why bear the cost of being a public company just to get bashed by the market every time you make a strategic move that puts the long-term over the short-term?
So here’s the question:
Is this dynamic going to change? Will we see the number of VC-backed private companies to public companies approach parity?
Short answer: probably not.
Here’s our model, using 10-year historical averages:
End 2024 with approx. 36,000 VC-backed private companies (Methodology: we started with PitchBook’s estimate but made an assumption for annual wind-downs using data from Carta).
(+) 4,169 new VC-backed companies annually (Source: PitchBook Venture Monitor).
(-) 1,263 IPOs and M&A exits each year (Source: PitchBook Venture Monitor).
(-) 1,462 estimated wind-downs annually (Source: Carta Insights and Caplight estimates).
(=) the number of VC-backed private companies grows each year!
To approach the last time public and private markets were at parity, we would need 10 consecutive years of record-low new VC-funded companies (3,499 in 2016), record-high exits (2,031 in 2021), and record-level wind-downs (~4,200 projected in 2024).
But in VC, exits and investments are positively correlated, making this scenario highly unlikely.
It’s clear to us. The future of capital markets is Private. If you only invest in public companies, you’re so 1996.
DISCLAIMER: "This is for informational purposes only and does not constitute an offer to buy or sell securities. Any investment in private funds is speculative, carries risk, and is suitable only for those who can bear the loss of their entire investment. Private funds investments are illiquid, and shares will not be redeemable at investor's discretion. Investors should fully understand and be able to assume the risks associated with investing in private funds."
