A16Z's David George on How Private and Public Markets Fused Into One

What It Covers

David George, head of Andreessen Horowitz's $7B growth fund, explains how private markets have accumulated $5 trillion in tech market cap — nearly 25% of the S&P 500 — why elite companies like Stripe, SpaceX, and OpenAI delay IPOs, and how value creation has fundamentally shifted away from public markets.

Key Questions Answered

• •Private market scale: Private tech companies now represent $5 trillion in market cap — 40% of the S&P 500 excluding the Mag Seven. The sector grew 10x in ten years while the number of public companies was cut in half. The 10 largest private companies alone account for 40% of that total private market cap.
• •Value creation shift: In IPOs from ten years ago, 88% of total market cap creation happened in public markets, with only 12% in private markets. That ratio has inverted: recent IPOs show 55% of value creation now occurs while companies remain private, making late-stage private funds the primary vehicle for capturing growth.
• •Employee liquidity mechanics: Private companies run tender offers — typically twice yearly — allowing employees to sell roughly 25% of vested shares at a set price. SpaceX pioneered this model. While not identical to public RSU quarterly deposits, it provides sufficient liquidity to compete for talent against cash-rich public tech companies offering automatic stock distributions.
• •AI software displacement: OpenAI and Anthropic combined will add more revenue in 2026 than the entire legacy software market — SAP, Salesforce, Workday, ServiceNow, and others combined. Net dollar retention across incumbent SaaS vendors has declined steadily since 2021, signaling growth is migrating to AI vendors even without mass customer churn from existing platforms.
• •Outcome-based pricing as the decisive shift: The business model transition from seat-based SaaS subscriptions toward outcome-based pricing — paying only for verified results — structurally favors AI-native startups over incumbents. Customer support is the first sector where this is measurable. When buyers shift to outcome purchasing at scale, legacy vendors face a compounding competitive disadvantage beyond just product gaps.