Data Points to Healthier VC Market — So Why Does It Still Feel Stuck?

On paper, things seem to be moving again for the US venture capital market. IPO volumes were higher last year than the year before, growing every year since the depths of 2022.

That may be a low bar, I know, but let's try and find the silver lining here, right?

And now, almost inevitably, the speculation machine is warming up around the potential for "mega IPOs" of SpaceX, Anthropic and OpenAI. These would redefine the scale of a venture-backed listing assuming they do come to market.

So why does the venture ecosystem still feel a little off?

Probably because liquidity in the market has been poor for a while. Since the market peak in 2021, many LPs have experienced consecutive years of negative net cash flows. Capital kept being called, but distributions lagged. Even as public markets reopened and headline exits returned, the distributions back to LP bank accounts remained stubbornly scarce.

An IPO does not automatically translate into liquidity for venture investors, unfortunately. In some recent listings, much of the capital raised has gone to the company rather than to existing shareholders. Lockup periods delay selling and volatile market conditions encourage partial exits at best so what looks like a clean ending on a deal tombstone can, in practice, be the beginning of a much longer wait for cash.

And then there's scale.

The venture market expanded dramatically during the boom years. Fund sizes grew, late-stage valuations ballooned, the time between fundraising rounds increased and holding periods stretched. The amount of value now sitting in private portfolios is enormous so against a backdrop like that, even a healthy IPO calendar struggles to make a meaningful dent.

This is partly why the rumors around SpaceX or OpenAI going public are so emotionally charged. These companies are big enough to generate liquidity at a scale that actually registers. One or two such IPOs could return more cash than dozens of smaller listings in aggregate.

Of course, the long-term impact of any of these listings ultimately depends on whether these companies can produce sustainable cash flow, not just command enormous valuations at the point of going public. But if liquidity depends on a handful of once-in-a-generation companies, most venture funds won't have meaningfully participated because the cash will be concentrated in specific portfolios, owned by specific investors, while the broader ecosystem continues to wait its turn.

In that sense, the focus on SpaceX and OpenAI highlights the underlying problem rather than solving it. The 'exit valve' is just very uneven.

For many funds, especially those raised in the late-2010s and early-2020s (the banner fundraising year of 2021 seems a lifetime ago now), liquidity remains theoretical. Secondaries help at the margin, but they don't change the system-wide math. Until the market returns to a dynamic where distributions exceed contributions consistently, LPs will continue to feel constrained, and fundraising will continue to feel harder than it used to (even though fundraising was better in 2025 than any year since 2021).

Viewed this way, the current moment feels less like a clean recovery and more like a slow digestion process. The venture ecosystem is trying to absorb a decade of growth, risk-taking, and inflated expectations, all of which takes time.

The biggest shift, at least to me, is psychological. For years, venture capital rewarded patience (to a certain extent). But today, patience is being tested by cash flow.

Maybe that's why the market still feels a little like it's stuck in second gear, even as the data improves. Not because progress isn't happening, but because the form it's taking doesn't yet solve the problem everyone actually has.

Until capital starts flowing back at scale, venture will remain cautious, inward-looking, and selective.

And perhaps that's the point of this phase. After years of expansion driven by valuations and optimism, the industry is being reminded that, at the end of the day, cash is still king, apparently.

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