Despite initial predictions of a robust year for Initial Public Offerings (IPOs), 2025 proved to be a mixed bag for technology exits, according to a recent deep dive by Meritech. While the IPO window barely cracked open, with only a handful of pure-play software companies going public, the Mergers & Acquisitions (M&A) market roared back, achieving a decade-high volume of $587 billion. This trend saw many of the most promising private companies, such as SpaceX, OpenAI, Anthropic, Stripe, and Databricks, continue to opt for private capital over public listings, leading to muted returns for late-stage investors in the few IPOs that did occur. However, the outlook for 2026 appears more optimistic, with potential mega-IPOs on the horizon.

Meritech's comprehensive analysis, available here, offers key insights into these dynamics.

IPO Market Remained Subdued in 2025 with Just Six Software Listings

Contrary to early forecasts, the IPO market for technology companies, particularly software, remained significantly constrained in 2025. The year saw a mere six pure-play software/infrastructure IPOs, a stark contrast to the 27 pure-play SaaS IPOs recorded in 2021. This subdued activity highlights a broader trend where public markets have become less attractive for leading tech innovators. Companies like SpaceX, OpenAI, Anthropic, Stripe, and Databricks, despite high demand for their shares, strategically chose to raise private capital, extending their private tenure.

M&A Surges to Decade-High $587 Billion

While IPOs faltered, the M&A landscape experienced a dramatic resurgence, marking the biggest story of 2025. The total M&A volume across public and private technology companies reached an impressive $587 billion, representing the highest figure in the past decade. A significant factor driving this surge was a perceived shift in the regulatory environment, particularly within the U.S. Among the notable private software deals were Wiz ($32 billion), Scale AI ($14.3 billion), and Armis ($7.75 billion).

Figma Sets a New Benchmark for IPO Quality

Amidst the challenging IPO environment, Figma emerged as a standout performer, establishing a new benchmark for quality. The company demonstrated nearly 50% year-over-year revenue growth and an impressive 30% free cash flow margin on over $800 million in last twelve months (LTM) revenue, with an implied annual recurring revenue (ARR) of approximately $1 billion. Figma stands as the only company trading above 10x Enterprise Value to ARR (EV/ARR), underscoring its exceptional market position.

Solid IPO Metrics, Yet Muted Returns for Investors

The 2025 software IPO cohort showcased solid median metrics, including LTM revenue of $616 million, 35% LTM revenue growth, and (5%) LTM free cash flow margins. The median valuation stood at 8.7x EV/ARR. However, returns for investors from the most recent private funding rounds were largely muted, with the median showing a 10% decline. Figma and CoreWeave were notable exceptions, delivering returns of 61% and 52% respectively.

Public Software Valuations Remain Low, But Acquirers Are Selective

Despite a large number of public software companies trading at seemingly attractive valuations—92 companies (85% of the total) below 10x next twelve months (NTM) revenue, and 60 below 5x NTM revenue—acquirers remained highly selective. While these valuations might appear reasonable for buyers, the median NTM revenue growth rate of 11% for these companies was often less compelling. Consequently, most public M&A multiples paid were under 10x NTM revenue. The overall 2025 IPO market was also highly concentrated, with 21 technology IPOs totaling nearly $150 billion in market capitalization. The top five—CoreWeave, Figma, Klarna, Sailpoint, and Chime—alone accounted for 56% of this total.

Additional Key Learnings from Meritech's Review

Meritech's analysis also revealed several other important trends:

  • Non-software tech IPOs (spanning consumer, fintech, and healthcare sectors) exhibited a median LTM revenue of $378 million with 33% growth and 8% FCF margins, indicating a better margin profile compared to their software counterparts.
  • Returns from the last private rounds for non-software IPOs were meaningfully better, with a median 6% return, contrasting sharply with the software cohort's median 10% loss.
  • The median market capitalization at IPO continues to rise as companies increasingly stay private longer, suggesting that while the volume of IPOs may be lower, the individual outcomes are larger.
  • The Nvidia/Groq licensing deal announced in late 2025 underscored a continued appetite for AI infrastructure M&A outside traditional software.
  • Fear surrounding non-AI related stories contributed to private equity (PE) and strategic buyers remaining less active, despite historically cheap public software valuations.