David George, head of the Growth Fund at Andreessen Horowitz (a16z), joins hosts Tracy Alloway and Joe Wiesenthal to discuss the massive shift toward private markets and delayed IPOs among major tech companies.

The conversation explores why companies like SpaceX, Stripe, and OpenAI are staying private longer, the mechanics of employee compensation in private companies, and the emergence of SPVs (Special Purpose Vehicles) in secondary markets.

George provides insights into a16z's $7 billion fifth growth fund and their portfolio of late-stage investments, while discussing the structural challenges facing public markets and the unprecedented growth rates of AI companies.

The $5 Trillion Private Market Revolution

Private market high-value tech companies represent approximately $5 trillion in market cap, equivalent to 25% of the S&P 500, 15% of Nasdaq, or 40% excluding the MAG seven companies.

The ten largest private companies account for 40% of that $5 trillion market cap, demonstrating the extreme power law concentration in private markets.

This private market sector has grown 10x in ten years while the number of public companies has been cut in half over the last twenty years.

Only three companies in a16z's public market universe are growing over 30%, compared to their growth fund's average investment growing 100%.

Why Companies Delay Going Public

Private capital markets have become deeper and more liquid, reducing the need for companies to access public markets until they require massive capital raises.

Public market costs can reach $10-20 million annually for smaller companies, making it economically challenging for companies that would have gone public at $100 million revenue fifteen years ago.

Public market investors and investment banks are tilted toward large-cap companies, making it difficult for smaller companies to get attention from quality investors and research coverage.

Volatility concerns drive founder decisions - 'this generation of founders has seen the 2021 run-up and then the falloff in 2022-2023' - David.

Employee Compensation in Private Markets

Public market employees receive quarterly RSU deposits that are liquid and already net of taxes, creating 'clockwork' compensation that private companies must compete against.

Private companies increasingly offer tender offers where employees can sell 20-25% of their vested stock annually, providing a substitute for public market liquidity.

SpaceX has 'famously done a really good job running twice a year tender offers for their employees' with high employee satisfaction and retention - David.

There's generally no stigma around employees selling modest portions of their holdings in tender offers, as it typically represents a small fraction of total equity including unvested shares.

The SPV Problem and Cap Table Management

Founders 'for the most part, really don't like' SPVs because they want to know exactly who is on their cap table - David.

Some investors misrepresent their vehicles, showing up with a legal entity name that obscures the fact it's actually an assembly of new investors only investing in that single vehicle.

A16z invests directly out of their funds as 'a point of pride with founders' to provide transparency about capital sources.

SPVs carry inherent single-company risk compared to diversified funds, making them 'potentially devastating' if the investment doesn't work out.

Private vs Public Market Valuations

David believes 'if you took our portfolio and put it in the public markets, it would trade higher than the private markets,' indicating a cost of capital discount in private markets.

Value creation has shifted dramatically: recent IPOs generated 55% of market cap creation in private markets vs. 45% public, compared to 12% private vs. 88% public a decade ago.

A16z's growth fund invested at an average of 21x revenue multiples in companies growing 100% annually, which David considers 'an incredible investment opportunity.'

Public market investors struggle to value hyper-growth companies, automatically building models that assume growth deceleration rather than sustained high growth rates.

AI's Impact on Capital Markets and Software

A16z is 'probably the largest investor in the AI industry' with investments in 'two-thirds of the aggregate AI revenue' in private markets.

AI companies are 'speed running the process of company growth,' becoming bigger and more consequential much faster than previous generations.

The AI infrastructure buildout requires approximately $5 trillion over 5-7 years, 'larger than the US highway system overall.'

'There are no dark GPUs' - every GPU deployed gets immediately utilized, contrasting with the Internet buildout characterized by 'dark fiber' - David.

Traditional software companies face a growth crisis as 'all the new budget in any buyer organization is going toward AI initiatives right now.'

'Open AI and Anthropic alone will add more revenue in 2026 than the total revenue added by all of the software market' including SAP, Salesforce, and Workday - David.