On the eve of a historic IPO for Silicon Valley’s investor community, the fragilities of venture are as clear as they’ve ever been to me.
I’ve been thinking about this irony for days: Anthropic is set to go public as soon as next week (everything I’m hearing says “Jensen Huang’s affair be damned, all systems go”), and while this is primed to be a banner moment for VC, venture seems to be structurally over its skis.
Consider recent data from PitchBook: Hitting a $5 billion valuation takes 80% less time, but 74% more capital, according to the company’s latest U.S. Valuations report.
“Higher valuations raise the bar to achieve profitable exits, and AI is expensive to run,” said Emily Zheng, PitchBook senior research analyst, via email. “Cracks are beginning to show in venture, including large amounts of AI-related debt and a likely slowdown in data center expansion given the recent election.”
The reality is this: Valuations are soaring higher and more readily, but exits are still tough. Zheng is clear that the IPO window—unless a company is in a very select group like SpaceX or Anthropic—remains shut.
“The IPO window has not reopened,” she said via email. “Most listings this year have been in health care, with the high-growth tech names LPs need for distributions largely absent. Removing mega IPOs from 2026’s totals reveals that exit value remains at the same constrained level that has defined every year since the pandemic.”
M&A remains a viable option, but in many deals, Zheng said, “valuation compression remains the dominant theme, as Q3 revealed with Bending Spoons’ acquisitions of Airtable and Miro at significant discounts.” (Airtable, for example, was acquired for $1.28 billion in cash, a vertiginous drop from its 2021 $11.7 billion peak valuation.) Rising rates and broader economic uncertainty are primed to render these pressures worse.
Historical data also suggests the current venture vintage could be in trouble, according to PitchBook’s recent U.S. VC Fundraising and Returns data: Past funds haven’t necessarily performed well during periods characterized by high interest rates (new Federal Reserve Chair Kevin Warsh already hiked rates once in 2026, and another hike’s on the table for December). There’s no way to prove causality, but the stressors of high rates, high valuations, and sluggish exits definitionally create pressure.
“The current market is a strange mix of high prices, low liquidity, and a relatively uncertain outlook,” said Zheng via email. “ The outlook for current vintages will likely not look as great as their current markups.”
And as the day of Anthropic’s seemingly imminent IPO approaches, it’s worth remembering that post-IPO performance has been dicey for the few major IPOs we’ve seen: CoreWeave and Circle, up about 52% and 116% respectively since their listing days, are the exception. Figma’s down about 42% in its life as a public company, while Cerebras is down roughly 45%. Nevertheless, what happens next with Anthropic will be the harbinger of where venture and startups go from here.
“Strong performance would validate AI’s enormous private valuations, spurring dealmaking and exit activity as real distributions are injected back into LP portfolios,” said Zheng via email. “Weak performance would bring into question whether AI companies are wildly overvalued.”
That is, of course, the multi-trillion-dollar question.
See you tomorrow,
Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joey Abrams curated the deals section of today’s newsletter.
VENTURE CAPITAL
– Fractile, a London-based developer of AI inference chips, raised $720 million in Series C funding. Thrive Capital, Founders Fund, Lightspeed, and Redpoint led the round and were joined by Felicis, CapitalG, and Dragoneer Investment Group.
– Operand, a New York-based provider of AI-powered due diligence software for private equity firms, raised $31 million across seed and Series A funding. Khosla Ventures led the round and was joined by Felicis, Y Combinator, Soma Capital, and SV Angel.
– Imprint, a New York-based payments, loyalty and customer intelligence platform for co-branded credit cards, raised $130 million. Khosla Ventures led the round and was joined by Positive Sum and existing investors Hedosophia, Ribbit Capital, Spice, and Thrive Capital.
– Edelbyte, a Tel Aviv- and San Francisco-based provider of data search and analytics software, raised $70 million across seed and Series A funding. Sequoia and Quiet Capital led the round and were joined by Greenoaks and Swish Ventures.
– Bay, a Tel Aviv-based provider of AI agent security software, raised $50 million across seed and Series A funding. Battery Ventures led the $37 million Series A and was joined by Micron Ventures and others. YL Ventures and Striker Venture Partners led the previously undisclosed $13 million seed round.
– Zus Health, a Boston-based provider of AI-powered health care data infrastructure, raised $33 million in Series B funding. Drive Capital led the round and was joined by Sanofi Ventures, HealthX Ventures, Alumni Ventures, and existing investors Andreessen Horowitz, F–Prime, Maverick Ventures, and JAZZ Venture Partners.
– Plurai, a New York-based provider of simulation and testing infrastructure for AI agents, raised $13 million in seed funding. Team8 led the round and was joined by U&I, Velocity, Mercer, and angel investors.
PRIVATE EQUITY
– Marshall & Stevens, backed by Coalesce Capital, acquired Baumann Moreau, a Tampa-based provider of business valuation, forensic accounting, and expert witness litigation services. Financial terms were not disclosed.
EXITS
– Motive Partners and CC Capital agreed to sell Wilshire, a provider of investment advisory, investment solutions, and data and analytics services, to Marsh (NYSE: MRSH). Financial terms were not disclosed.
FUNDS + FUNDS OF FUNDS
– The 81 Collection, a Chicago-based investment firm, raised $82 million in an additional close of its second fund, which targets minority investments in founder-owned services, manufacturing, and other physical-economy businesses.