There have been 191 IPOs in the US this year… vs. 1,000+ in 2021.‍

For more venture funding to go into companies, it needs to eventually come back out, making IPO exits a critical part of the VC ecosystem.

But since 2022, IPOs have been stuck. The average # of IPOs in the US from 2022 to YTD 2024 is down 60% vs. the 5yr period ending ‘21.

Capital markets, and the VC industry specifically, are eagerly awaiting a resurgence of IPO activity. Most market participants we speak to expect a surge in tech IPOs to kick off in Q2 ‘25.

This sparks the question: what does it take for a company to go public?

Like most things in VC, it’s an art & a science.

I’ll focus on the science, but the artwork includes needing to have a scaled revenue base (usually $100m+), strong growth with a path to profitability, and a really good story.

The science:

Preparing a company for an IPO involves many steps. Companies taking these steps may signal their readiness to go public opportunistically when market conditions are ideal.

Here are some leading indicators of an IPO, and recent examples from notable VC-backed tech companies (sources below):

🔁 Hiring an experienced public company CFO — + points if this person has taken another VC-backed company public already. Ex: Canva's recent hiring of Zoom's previous CFO.

🏦 Hiring investment banks — a tier 1 bank leading an IPO is usually a positive signal to the market. Ex: Chime hiring Morgan Stanley for a possible 2025 IPO.

🧹 Cap table cleanup — not always a signal, but works in combination with the others. If you’ve been private for 10+ years, you may remove potential downward pressure on your stock by giving would-be sellers a liquidity valve before IPO lockup expiration. Ex: Stripe.

🔎 Rumors of registration statement preparation (S-1, F-1) — going public typically involves months of regulatory paperwork. Starting that process is a signal. Ex: Figma.

🤐 Confidentially filing — allows companies to gather feedback from the SEC on their registration statement without revealing too much about their financial performance to the market. Ex: Klarna.

🔔 Publicly filing — the first time the public can view a company’s registration statement, usually with placeholder IPO terms. But a clear sign the company plans to list imminently. Ex: ServiceTitan.

At Caplight, we’ve seen a rise in some of these indicators, which might suggest that the IPO window is about to open.

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