IPOs Decline as Private Funding Grows in Fintech

The technology industry's departure from public markets has become increasingly pronounced in recent years, particularly when contrasted with the IPO golden age of the 1990s.

Driven by the dot-com surge, the 90s established unprecedented benchmarks for emerging tech companies entering public trading. The market, nevertheless, has struggled to sustain such levels of activity subsequently.

IPO cycles have risen and fallen alongside global economic conditions, expanding during periods of economic strength and contracting in times of financial strain.

The 2008 financial meltdown, for instance, triggered a wholesale withdrawal from public markets, as emerging firms sought to consolidate and safeguard their value privately.

Following a brief surge of intense activity in 2021, the lingering economic consequences of the COVID-19 pandemic ultimately fostered a comparable pattern in equity markets.

Currently, in 2025, whilst tech unicorns emerge with greater frequency than previously, IPOs remain far from their former vigour.

Whilst this partially stems from economic instability created by international trade barriers, it also reflects a wider shift in global economics and corporate strategy.

The current IPO landscape

During 2021, 126 firms went public via the London Stock Exchange, with numerous ventures being either tech or fintech enterprises.

This year, merely 15 have made the leap. This marks one of the LSE's poorest performances in thirty years.

"Public market investors are now more focused on a company's profitability and sustainable growth rather than just prospective growth," says John Blank, Chief Equity Strategist at Zacks Investment Research.

This shift stands in marked contrast to the speculative growth emphasis that characterised previous technology expansions.

Given the UK's – and much of the global community's – intense focus on the AI revolution, this appears counterintuitive.

The explosion of private markets

Examining the public market stagnation more closely reveals that private funding practices have surged dramatically in recent years.

The State Street Private Equity Index currently represents over US$5.7tn in value, exceeding five times its initial committed capital of US$1.1tn from its 2007 launch.

"The substantial growth in capital managed by large private equity and private credit firms provides a viable alternative to public market funding," John explains.

This year has witnessed numerous prominent acquisitions and direct investments between major tech corporations, including the continuing partnerships OpenAI maintains with entities like Microsoft and SoftBank. This wealth of private capital has diminished the need for companies to face the demands of quarterly earnings scrutiny and heightened regulatory oversight accompanying public offerings.

The billion-pound holdouts

SpaceX demonstrates this pattern, with Elon Musk's space venture reportedly negotiating insider share sales at approximately US$400bn valuation – surpassing McDonald's and Boeing's combined worth – whilst never pursuing public listing.

Payment processing leader Stripe recently concluded a tender offer establishing the company's value at US$91.5bn, whilst OpenAI achieved a US$300bn valuation in March through new funding spearheaded by SoftBank.

These enterprises have attained enormous scale and revenue streams whilst preserving privacy and circumventing public market fluctuations.

Tim Levene, CEO of Augmentum Fintech, Europe's largest fintech fund, believes that consolidation, rather than public listings, will be the dominant trend in the short term.

"The likely exit for a lot of our portfolio companies will be mergers and acquisitions, rather than IPO," he explains.

What occurred with Figma's public debut?

The instability confronting technology IPOs is arguably best demonstrated by Figma's volatile public market launch this summer.

The San Francisco-headquartered design software firm's shares jumped 250% after its July IPO, climbing to US$142 per share by 1 August, 2025.

Nevertheless, the excitement was fleeting, with shares dropping 60% from their height by September 19th after the company's initial post-IPO earnings announcement.

"Our performance this quarter highlights the strength of our business and the critical value of design," says Figma's CFO, Praveer Melwani, despite the market's jumpiness.

The firm achieved 41% revenue growth to US$249.6m in the second quarter, but projected more modest 33% growth for the third quarter.

Figma's sharp price movements resulted from several elements: only 8% of shares were originally offered to the public, generating artificial shortage, whilst 25% of insider restrictions lifted in early September, saturating the market with extra supply.

The firm's price-to-sales multiple of 31 times – exceeding four times Adobe's 7x ratio – demonstrates the elevated valuations that can leave technology shares exposed to severe corrections.

"There were no big surprises in Figma's second-quarter results as it continues to deliver robust growth," says Arjun Bhatia, an analyst at William Blair.

Nevertheless, the stock's dramatic volatility demonstrates how demanding the public markets have become for recently-listed technology firms. Whilst outcomes can remain highly positive, it appears that many boards are adopting more cautious strategies.

The IPO outlook

Analysts warn that the IPO downturn may persist longer than earlier cycles.

Trade barrier challenges for smaller firms, reduced economic expansion and continuing market instability indicate that conventional IPO trends may not resume quickly.

"This is likely to get worse, not better now," John suggests.

This shift leaves individual investors with reduced exposure to high-growth technology enterprises, potentially transforming how everyday savers can engage with future business achievements.