The CODEW | Build vs Buy Series, Part 7
In 2025, PitchBook and the National Venture Capital Association counted 995 acquisitions of US venture-backed companies. In the same period, only 62 of those companies went public. That's roughly 16 sales for every IPO — in a year Renaissance Capital called the strongest for new listings since 2021. Even when the IPO window is genuinely open, as it was in 2025 and into 2026, the overwhelming majority of successful startups still choose to get bought rather than go public. This series has spent six parts asking why big companies buy. Part 7 asks the other half of the question: why do the startups say yes?
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| Photo by Tima Miroshnichenko from Pexels |
The Math Most Founders Never Clear
Going public isn't available to most companies, regardless of preference. Industry heuristics put a rough floor on the conversation: about $50 million in annual recurring revenue for a solid acquisition to be viable, $100 million before an IPO is a realistic conversation, and $500 million or more before a listing counts as a landmark offering that Wall Street gets excited about. Underwriting fees alone typically run 5–7% of gross IPO proceeds, on top of legal, accounting, and marketing costs that can run for a year or more before a company even rings the bell. For the vast majority of venture-backed startups, that threshold is simply never reached — acquisition isn't a lesser choice; it's the only exit that exists.
Why Acquisition Wins Even When IPO Is Possible
For the smaller number of companies that could plausibly go public, three practical advantages still tilt most of them toward a sale:
Speed and certainty. An acquisition can close in months with a negotiated price locked in before signing. An IPO takes a year or more of preparation, and the final price isn't set until the roadshow meets the market — which can undervalue a strong company simply because of bad timing, the way market volatility punished several 2026 offerings that were pulled or delayed even in a year bankers expected to be strong.
No lock-up, no ongoing scrutiny. Founders and early employees in an IPO typically can't sell shares for six months after listing, and even then they're selling into a public market subject to quarterly disclosure, activist investors, and analyst pressure. An acquisition converts equity into cash or acquirer stock at signing, with founders answering to one buyer instead of the public markets.
Talent retention through acqui-hire structuring. A growing share of 2026 deals are explicitly built around keeping a small, specific team together rather than absorbing a company's full product line — teams under 100 people have landed $100 million-plus exits this way. That kind of outcome simply isn't available through an IPO, which requires a company-wide growth story, not a single team's worth of talent.
The Smartest Companies Aren't Choosing — They're Running Both
The most sophisticated version of this decision isn't IPO versus acquisition at all. It's dual-tracking: preparing a confidential S-1 filing while simultaneously keeping acquisition conversations alive, so each process creates leverage over the other. Anthropic, OpenAI, and SpaceX all followed versions of this pattern in 2026 — filing IPO paperwork while acquisition-style capital and partnership talks continued elsewhere. Ripple took the position explicitly, with its president stating the company has no IPO timeline and the balance sheet to keep making acquisitions and strategic partnerships without ever needing a public debut.
Ironically, this dual-track dynamic traces back to a 2012 law meant to do the opposite. The JOBS Act lets companies file IPO paperwork confidentially and "test the waters" with investors before committing — intended to make going public easier. Research presented at a 2026 Harvard/Stanford/Yale junior faculty forum found it backfired: confidential filings gave law firms and boards a clean way to solicit competing acquisition bids while an S-1 was quietly in motion, pushing acquisition prices up and IPO valuations down. A law designed to revive the IPO market ended up making the sale option more attractive instead.
The Trade-Off Nobody Puts in the Press Release
IPOs can deliver returns several times higher than an acquisition for the same company, and going public buys credibility, a permanent capital-raising channel, and a valuation ceiling that isn't capped by what any single acquirer is willing to pay. Selling gives up all of that upside in exchange for certainty. Some legal scholars argue this trade-off has higher costs too: when more successful startups get absorbed instead of going public and staying independent, there are fewer emerging companies left to challenge large incumbents, which can mean less competition and fewer public investment opportunities for anyone who isn't already a venture investor.
The Takeaway
For most startups, the choice was never really IPO versus acquisition — the revenue bar for a real public listing simply isn't reachable for the vast majority of venture-backed companies. For the small number that do clear that bar, speed, certainty, and control keep tilting the decision toward a sale, and the smartest ones aren't picking one path at all — they're running both until the better offer shows up. As long as acquisition premiums keep beating IPO price discovery on speed and certainty, expect that 16-to-1 ratio to hold.
Previously in the series: Lessons from Failed Acquisitions. Next: The Economics of Acqui-hires.
Erwin Castro
Founder & Editor • The CODEW
Erwin Castro is the founder and editor of The CODEW, covering technology mergers and acquisitions, startup exits, artificial intelligence, enterprise software, and Build vs Buy strategy. With more than a decade of journalism experience, he has contributed to Sportskeeda, IBTimes, University Herald, US Blasting News, and Seeking Alpha. His work focuses on explaining the business strategy behind technology deals and their impact on the global technology industry.
Reviewed by Erwin Castro
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Sunday, July 19, 2026
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