The New IPO Playbook: Why More Value Creation Is Happening Before Companies Go Public
Investors in companies like OpenAI, SpaceX and other high-growth firms are increasingly buying future optionality rather than current cash flow, according to Dean Rubino, CEO of KPC Private Funds. These businesses are valued on the belief they will become foundational infrastructure for AI, aerospace and next-generation computing. Over the last two decades, the private capital ecosystem has evolved dramatically, with sovereign wealth funds, private equity and venture investors funding companies at a scale previously only available through public markets. As a result, companies are staying private longer and achieving far greater maturity before IPOs.
Rubino discusses whether most enterprise value creation is now happening pre-IPO, how advisors should approach position sizing in private markets, and what the IPOs for Anthropic, SpaceX and OpenAI could mean for investors.
CM: You have argued that many of today’s most valuable private companies are being valued on future optionality rather than current cash flow. How should investors think about that distinction?
DR: One way to think about it is through the lens of margin for error.
Imagine a company’s lifetime value creation occurs on a scale of 1 to 10. A generation ago, public investors might have gained access around a 5. Today, they may not get access until an 8. That doesn’t just mean less upside remains; it means there’s less margin for error. When more of the value creation has already occurred, investors need to be right with greater precision. The exact numbers aren’t important. The concept is.
When investors could buy at a 5, they potentially had half of the value creation curve still ahead of them. If the company underperformed expectations, there was often still enough growth remaining to generate an attractive outcome.
When investors first gain access at an 8, there may be less upside remaining, but more importantly, there is less room for error. Future growth must be realized more precisely, and unforeseen competitive, technological, or economic shocks can have a greater impact on investment outcomes.
That’s why pre-IPO investing isn’t simply about getting in earlier. It’s about expanding the opportunity set and increasing the margin for error available to investors.
CM: Is it fair to say that private markets are now performing much of the role that public markets once served in funding growth?
DR: Yes, but only up to a point. Private equity, venture capital, sovereign wealth funds, family offices, and other institutional pools of capital have taken on a much larger role in funding growth than they did a couple of decades ago. That said, the public markets still matter. At a certain scale, especially for capital-intensive businesses, the depth, liquidity, and visibility of the public markets can be hard to replicate privately.
The question is not whether private markets have replaced public markets. The question is where private markets now sit in the capital-formation timeline. Increasingly, they are funding a larger share of the growth before the public market investor gets access.
CM: Are we witnessing a permanent shift in capital formation, or could market conditions eventually push companies back toward earlier IPOs?
DR: Market windows will always matter. Strong IPO markets can pull companies public sooner, and weak markets can delay them. But the broader shift appears structural rather than cyclical.
Private markets today are larger, more sophisticated, and more flexible than in the past, and that evolution is continuing. As a result, private companies have far more options to remain private for longer periods of time. Reinforcing this phenomenon is the continued development of secondary markets, which provide founders, employees, and early investors with additional liquidity options without requiring a public offering. That combination gives high-quality companies greater control over when, and if, they choose to go public. An IPO may still be the preferred route, but it is no longer the only route to growth capital or liquidity.
The old assumption that public markets are the default venue for late-stage growth capital is gone. The center of gravity in capital formation has shifted, and I don’t see that reversing anytime soon.
CM: Why do many advisors still default to post-IPO investing as the “prudent” approach, even if it may mean missing earlier value creation?
DR: Because up until recently they didn’t have a choice. Advisors have not been wrong to default to public equities. They have been operating within the tools available to them.
For a fiduciary advisor, access alone is not enough. A pre-IPO opportunity requires institutional-quality diligence, proper custody or custodian recognition, audited financials where applicable, third-party valuation discipline, professional administration, clear documentation, and rational position sizing. Without that infrastructure, it is very hard for an advisor to conclude that the investment fits within a prudent client portfolio.
The issue is not that advisors are too conservative. The issue is that the market has not historically given them a clean, fiduciary-friendly way to access these opportunities. That is now beginning to change.
CM: How should investors frame the trade-off between liquidity and earlier-stage upside when considering pre-IPO opportunities?
DR: Investors should treat illiquidity as part of the expected return, not as a footnote. If you are giving up liquidity, you should be compensated for it. From a purely financial perspective, the market offers numerous ways to estimate an appropriate liquidity premium.
In practice, however, after years of KPC Private Funds working with advisors, I’ve found that illiquidity, and the premium required to accept it, is ultimately a very personal decision. Two investors can look at the exact same opportunity and reach completely different conclusions because their cash needs, time horizon, and emotional tolerance for lockups are different. Those considerations need to be weighed against the investor’s appetite for upside and desire to participate in potential value creation earlier in a company’s lifecycle.
At the same time, the calculus is shifting in investors’ favor as private secondary markets continue to mature. That does not make pre-IPO investing liquid in the same way public equities are liquid, but it does reduce some of the all-or-nothing nature of the trade-off. Investors should still assume they may need to hold for an extended period, but the liquidity profile of private investments is becoming more nuanced than it was in the past.
CM: What lessons can investors learn from previous high-profile IPOs where substantial value creation occurred before public listing?
DR: The lesson is that an IPO is no longer necessarily the beginning of the growth story. In many cases, it is a financing event, a liquidity event, or a branding event that occurs after a tremendous amount of enterprise value has already been created.
Facebook is a useful example. By the time it went public, it was already a massive global platform. Uber and Airbnb are other examples of companies that achieved significant scale and valuation in the private markets before public investors had access.
The lesson is not that every pre-IPO company is attractive. It is the opposite. Investors need to be more selective, because late-stage private companies may already be priced like winners. The underwriting question is: what future growth remains, what risks still exist, and is the entry price giving you enough room to be wrong?
CM: Will broader access to private markets fundamentally change wealth management and portfolio construction?
DR: It should. For years, private markets were treated as a niche allocation for institutions and ultra-high-net-worth investors. That framework is becoming outdated.
As access improves, advisors will need to think less in terms of “public versus private” and more in terms of total portfolio exposure: growth, income, liquidity, duration, risk, tax treatment, valuation methodology, and client suitability.
The future of wealth management is not simply adding private investments to a public portfolio. It is building portfolios where private and public investments are evaluated together, with the right infrastructure around diligence, reporting, liquidity management, and position sizing. That is where the industry needs to go.
