Business Blog: The IPO Crystal Ball

The Crystal Ball: The 2025 outlook for IPOs, M&A, and the regulatory landscape

December 31, 2024

It's been a long, cold winter for VC exits.

The slow pace of acquisitions and initial public offerings has left startups and investors anxiously waiting for the thaw.

To judge by the comments from Term Sheet readers who particpated in our survey, the coming year may bring some relief as a new presidential administration and regulatory regime come into effect, with Silicon Valley insiders occupying key roles. But while the general outlook is positive when it comes to M&A, IPOs, and regulation, there are variables and exceptions embedded in different sectors and businesses.

Here's what you all think next year will hold for some of the most critical dynamics in this industry.

Note: Many answers have been edited for clarity and/or brevity. The deals section will return on Jan. 3.

IPOs: Cautious optimism

In 2025, the healthtech sector will see a wave of exits, with mature, profitable companies leading IPOs as the market recovers. Strong, later-stage firms focused on growth and unit economics are preparing to go public. —Lynne Chou O’Keefe, managing partner, Define Ventures

Q1 to Q2 will involve a lot of observation of the new administration. I don't think 'IPO windows' are an open-shut phenomenon—in any environment, IPOs are a series of paradoxes that must be aligned in order to move forward. I do think we will see more IPOs happen in the back half of 2025—though that is relative to a record-low last few years. —Ryan Hinkle, managing director, Insight Partners

The IPO market, particularly technology and fintech, has been rebuilding for a number of quarters, and we expect the market to open up more broadly next year across many core sectors, including healthcare, industrials, and consumer. —Seth Rubin, head of global equity capital markets, Stifel

The "Need for Liquidity" Iceberg and the Quasi-IPO: Late-stage VCs cast as Jack Dawson and early-stage VCs cast as Rose (whoever remembers her last name?). A tight IPO market and rising interest rates will push liquidity over the edge. PE firms, flush with cash, offer a lifeboat (or more appropriately an oversized door) for Rose to stay above water and Jack…I don't want to spoil the movie. —Jameson Hartman, vice president, RET Ventures

Expect more cyber IPOs over the next 18 months. Over the next 18 months, we're going to see a lot more cybersecurity exits. While this may include an uptick in M&A activity, I expect we'll see cybersecurity companies go public in 2025 and in the first half of 2026 given how large the market for cyber products has become. —Jake Seid, cofounder and general partner, Ballistic Ventures

"The IPO window has been limited in the MedTech space as of late. However, Ceribell's IPO in 2024 suggests there could be room for transformative companies to go public in the coming years." —Vijay Rajasekhar, associate, Intuitive Ventures

Next year will be a breakout year for IPOs and M&A in AI, particularly with the changing of the regulatory regime at the FTC and the significant growth rates we’re seeing in lots of these companies. Legacy businesses will seek to acquire both faster growing companies at reduced multiples and also AI talent to help them scale their product lines. I expect M&A to increase by at least 35% next year. The top 10 most active acquirers in the software world are falling off a cliff in terms of activity, which requires meaningfully the IPO market to roar open with a combination of AI and other software companies. —Tomasz Tunguz, founder, Theory Ventures

Stripe and perhaps Klarna could jumpstart the IPO market and simultaneously boost the moribund fintech universe. —Chris Gardner, partner, Underscore VC

I don't see Stripe going public in 2025. They've raised plenty of private funding, so they don't need liquidity right now. Their core business is strong, but they've been branching out into new areas like trade credit, lending, and recurring billing. They'll want those business lines to show more growth before they open up their books to the public. Investors are going to want to see a more robust, multi-line story—not just Stripe's core processing business—before they hit the market. —Kamran Ansari, venture partner, Headline

Tech IPOs will double and M&A triple from the anemic 2023, 2024 levels. —Shawn Carolan, partner, Menlo Ventures

I believe the IPO market will open up for software companies in 2025, but it won't be as hot as we saw in 2021. We'll likely see a dozen or so software companies go public, but it will take a long time to get back to levels we previously saw—perhaps in 2026. In 2025, we'll see some of the first AI IPOs with Coreweave expected to go public first. I also predict we'll see Databricks and Scale AI go public in the year ahead. —Jai Das, President and Partner, Sapphire Ventures

M&A: We're in business

We will begin to see more acquisition activity as the incumbents "go shopping" in advance of a real estate recovery. We've already seen some early movement on this front, including CoStar's acquisition of Matterport, Zillow's acquisition of Spruce, and Entrata's acquisition of Colleen AI. —Nima Wedlake, managing director, Thomvest Ventures

I expect with a more permissive administration, we'll see more M&A. The deal to watch out for? Amazon buys Anthropic. —Aaref Hilaly, partner, Bain Capital Ventures

Under the new administration, M&A in enterprise software is about to come back with a vengeance. Expect a flurry of activity as companies consolidate to build 'all-in-one' platforms powered by AI. —Gaurav Agarwal, COO, ClickUp

We think that IPO markets will finally rebound in 2025, beginning cautiously but accelerating in the second half of the year. The scaling threshold will remain high—prioritizing companies with at least $400-500 million in revenue—but will show signs of receding. That said, IPO volume will not come close to addressing the backlog of un-exited venture-backed companies. —Ravi Viswanathan, founder and managing partner, NewView Capital

In 2025, we'll see an increase in the level of fintech M&A. There are many early to growth stage fintechs who have strong product-market fit and have rationalized their businesses to breakeven, or profitability. —Charles Birnbaum and Eric Kaplan, partner and vice president, Bessemer Venture Partners

We won't see a large increase in tech M&A. As more vertical AI companies get founded, we'll continue to see M&A from public vertical SaaS companies, but most horizontal application companies won't feel the need to buy companies since they can build magical products faster than ever before. —Shravan Narayen, partner, IVP

Mid-sized private companies—those generating $25M to $100M in revenue—face mounting pressure to evolve or exit. Years of burn cuts and stagnant growth have set the stage for “Frankenstein” mergers: private-to-private deals designed to create stronger, more scalable entities that have a chance to reach escape velocity. —Simon Wu, partner, Cathay Innovation

2025 will be the year of AI exits. While 2024 saw mostly "license and hire" type exits and small M&A, which will also continue, 2025 will also be when we start to see the first few "AI-first" companies go public and the first significant real M&A in AI (>$2.5B). —Tanay Jaipuria, partner, Wing VC

Many mid-stage companies will face hard choices. Expect a surge in tactical M&A as public companies and well-capitalized startups absorb talented teams and complementary tech. Large-scale and transformational M&A deals will remain rare. —Adam Coccari, managing director, HubSpot Ventures

Cannabis industry consolidation will intensify as larger operators pursue strategic M&A and organic market share growth to offset pricing pressures. In this environment, survival equates to success. —Morgan Paxhia, cofounder, Poseidon Investment Management

After three years of slower activity, we anticipate a very active M&A environment for 2025. We're anticipating certain tech subsectors to be active for M&A including risk/compliance, security, AI, fintech and health tech. —Wayne Kawarabayashi, head of M&A, Union Square Advisors

Strategic buyers are exiting the year with lots of dry powder. In 2025, we expect to see these buyers come to market and a flurry of deals follow as regulatory issues that have been massive overhangs become much less of a concern. —Richard de Silva, cofounder and managing partner, Lateral Investment Management

This will be the year of the "unroll-up." Historically, many companies pursued aggressive growth through acquisitions, creating what we sometimes affectionately call "Frankenstein businesses." In 2025, we'll see a wave of unrolling, where businesses shed non-core assets through corporate carve-outs or spin-offs. This trend presents a significant opportunity for private equity sponsors and other acquirers to capitalize on these divestitures. —Dan Lynn, partner, Lead Edge

The regulatory outlook: Doors opening

Antitrust bodies will lessen their scrutiny of M&A, leading to an increase in M&A exits for venture-backed startups who realize they can't grow into their last-round valuations. —Zeya Yang, partner, IVP

Companies that tried to pursue exits in the past but were blocked by federal regulatory hurdles—particularly in deals with large tech companies—may find it easier to do so in 2025, with the forthcoming changes being signaled in Washington, particularly the proposed chair and commissioners of the FTC. —Alex Triplett, CFO/COO, Appfire

We should expect a lot less regulatory headwinds in 2025 for AI given David Sacks will be the AI and crypto czar for the new administration. This is likely to even result in the repeal of President Biden's executive order on AI. —Samir Kumar, General Partner, Touring Capital

With all three areas of government to be controlled by the Republican party, there are going to be some meteoric shifts when it comes to regulations and enforcement actions. Gary Gensler will be replaced, and Lina Kahn may also, which will cause far less strict regulations, though this doesn't necessarily mean the deal environment will significantly improve. The deal environment will have two forces working in opposite directions. From an economic perspective, interest rates likely will not go down at the speed many people expect, resulting in fewer IPOs and less M&A activity. On the other side, there is significant pent-up demand for deals as VCs want to send out DPI in older funds where investments have been held too long. With these two forces, there will be a higher volume of deals, though not as high as currently being expected by mainstream sources. —Ilan Nissan, head of private equity/M&A, Goodwin

If the new administration is able to deliver on the promise of increased regulatory clarity, it should bode well for the venture industry across multiple dimensions…accelerating innovation in AI to stay competitive globally…and dare I say potentially unlocking exit markets! —Kirsten Morin, Partner, HighVista Strategies

The new FTC will find the right balance between protecting consumers from big tech and not deterring all M&A activity across the board. The new FTC leadership will continue the prosecutions of Google, Meta, Amazon and others but be more permissive in approving other mergers, sending a signal to the market that M&A is allowed again, which will spur a series of deals and liquidity in venture. —Bradley Tusk, founder, Tusk Strategies

We're off for the new year, but back with more crystal ball predictions on Thursday.

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.

Term Sheet's Deals section will be back on Jan. 3. Subscribe here.