The IPO market isn’t dead — it’s just getting smarter

A candid conversation with Jeffrey Fidelman, CEO of Fidelman & Co., on why 2026 isn’t a broad market resurgence but a period of hyper selective capital deployment. From Series A pressure points to liquidity bottlenecks, niche fund strategies, and the real winners in the AI investment wave, this episode breaks down what’s actually driving investor behavior right now.

Mary MacNamara  

Hello everybody and welcome to Cents of Security. Today we are continuing our series on IPOs with Jeffrey Fidelman, CEO of Fidelman & Co.

Welcome Jeffrey. How are you?

Jeffrey Fidelman  

Good and Mary it’s a pleasure to be back.

Mary MacNamara  

Great. So, you’ve described Q1. 2026 as a period of selective engagement rather than a broad resurgence. What are some of the biggest indicators that investors are becoming more intentional with capital deployment? Even as risk appetite remains cautious.

Jeffrey Fidelman  

I think there might be two different ways to look at that.

Both from the invests perspective that are putting money into funds and different investment vehicles, and then the GP’s or the kind of investors behind the vehicles. And what we’ve seen over the past couple of years is this really interesting dichotomy, and I’ll loop this all the way back to IPOs of funds getting larger and their windows of of liquidity becoming longer by nature of them becoming larger.

And if you think back to 10, 15 years ago, Microsoft was a hundred or $200 million company, which is now almost laughable, then we see the numbers and how exponentially larger they’ve become. And I’m using that as an example because funds that are supporting early, mid, late, pre IPO stage companies have continued to get larger and larger and what ends up happening is that instead of companies going public at a certain valuation or at a certain market cap, they end up getting bought, re-traded, invested in for a longer period of time prior to even hitting a stock New York stock market or Nasdaq, or any type of publicly traded equity. Because of that, there is a big liquidity, I’m not going to call it crisis, but crunch that individual investors are feeling, especially when you’re thinking about private placements and investing in these funds or in private companies, they’re taking a longer amount of time to have true liquidity.

We’ve seen a lot of secondary funds, a lot of continuation vehicles come out for those fund managers so that they can continue being invested in some of these companies. And it’s not all bad news. Investors or LPs sitting inside of these funds have gains on paper, but typically speaking, they were expecting to have those gains come back to them in cash, not just in paper, so that they can continue reinvesting that capital. Returns at a certain point start to level off for a lot of these investors because you turn from a growth or a hypergrowth company to, it ultimately becomes a value company that the valuation isn’t necessarily increasing at the same exponential rate over the course of a longer period of time.

So when you think about investors being a little bit more selective in how they invest from a individual investor that’s investing either in a company or into a fund, I think a lot of what they’re thinking about now and what I’ve been talking to investors both in funds and LPs, has been tenor. This capital is for a certain amount of time, and I think a lot more investors are looking to have a shorter tenor on the capital that they’re investing in. We see a result of that mentality being in secondary funds or in secondary LP funds where you know, your tenor or you’ve invested in a company that’s already towards the end of having a liquidity event vis-a-vis a public offering or maybe a, an entire buyout taking private.

So, investors are starting to think more and more about how long am I invested in this company or in this fund for? From the GP side or from funds and actually putting money into companies. I think a lot of the mentality is driven by the LPs, is driven by their constituents and their investors themselves when deploying capital. They know they need to be more and more competitive in the market when raising capital.

And I’m taking outliers out of what I’m talking about and just going down the middle on how investors are typically thinking about selective investments. So, a lot of it has to do with tenor. Now, that’s not to say that they’ll, they have a thesis of FinTech and they’ll go choose, I don’t know a SaaS business just because it has a shorter tenor.

So the selectivity of it is not only my hyper-focused and having an investment philosophy and investment thesis around a specific industry, but my stage preferences are starting to change a little bit because I’d rather make a little bit less of a return and know that I’m getting my money back sooner than take a lot more of these fly balls,or fly shots so that I don’t know when I’m actually going to get capital returned to me.

Mary MacNamara  

So, series A has become a major pressure point. What milestones or validation signals are investors now requiring before they’re willing to lead an “A” round? And how does this compare to to earlier cycles?

Jeffrey Fidelman  

It definitely does compare in some shape or form. If we’re talking about, 10, 15 years ago, a seed round was to seed a company and a Series A was usually around $10 million, maybe $5 million, plus or minus the same amount. And over the course of time, the names of a lot of these rounds have been disassociated with what they meant originally and how they were titled.

So now a seed investor into an early stage company is typically looking for $500,000 or a million dollars in revenue, and usually in recurring revenue, which is, I always have this argument with some of my both LP and GP friends, where if you’re seeding a company, you can’t be expecting them to have a million dollars in revenue already.

It should be saving a company. So, for Series A, that same definition has pushed them along the along the stage preference of, from a qualitative perspective, a series A investor is looking for the business to be rinse and repeat. The engine is built, there is some semblance of product market fit, and that’s continuing to gain traction.

And they know that for every dollar that they invest. They’re getting a $4 return on investment, meaning the company’s getting a return on investment of $4 or a $1.50 or $8 or some sort of positive number on the money being put in. They’re no longer experimenting mostly they have a track and like I said before, it’s rinse and repeat quantitatively that also changes from investor to investors. So, it’s really difficult to state specific growth rates, specific revenue numbers or EBITDA numbers that Series A asks for. And it also depends on the industry and the business that’s happening. So, I typically look at that round, the difference between seed and series A seed is that you have revenue 500, maybe 300 to about a million dollars. You’re growing. You still don’t have a keen idea of product market fit. You’re still playing with different types of digital marketing or advertising or distribution by Series A. That is largely solved, and that’s why you’re going to series A investors. So essentially pour fuel on the fire.

Mary MacNamara  

So let me ask you a basic question here. Let’s say you’re a startup and you’re just beginning. You have this great idea, you built a prototype, nobody’s bought it yet, but it is pretty interesting. Is this something that you would have to go to angel investors for more capital or more funds, assuming you’ve used what you have.

Jeffrey Fidelman  

There’s probably three, three places. Angels. Yes. So that would be a priority. You do have some venture funds that are focused on pre-seed meaning, your seed now being defined as having revenue, your pre-revenue. So, you’d fall into the pre-seed bucket. And they also say that the first round is the three Fs.

It’s friends, family, and fools that invest in the first round of a company, and that’s the joke in venture and among super early-stage entrepreneurs. And that’s really where you’re going to first find your first capital. But I would caveat that, over the past couple of years, especially with vibe coding platforms like Lovable or Claude or, I don’t know, there’s probably another dozen or half a dozen out there.

It’s never been cheaper and more straightforward to build a product, to build an MVP and to launch it to market. It’s not necessarily scalable if you want to have 100 users or 50 users or a 1000 users, but I think and what I’ve been seeing is that a lot of, even pre-seed investors have higher expectations. They’re not giving you money so you can build an MVP, their expectation is that you have something already built, you have an idea, you have some interest in it and then you can go raise capital from pre-seed investors, whether it’s angels or friends and family or VCs that are specific to that.

Mary MacNamara  

That makes sense. Okay. So even small upticks in IPO or exit activity can influence sentiment. So how meaningful are micro signals or liquidity in shaping LP confidence and reserve strategies going into 2026?

Jeffrey Fidelman  

Super impactful to say the least. This is touching on something I was just speaking about in terms of there being a liquidity crunch where investors really only make money by investing capital and then ultimately getting a return on that. Capital management fees usually are meant to keep the lights on, pay certain salaries and certain functions of third-party service providers, but the real money is made at the end of the life of the fund or in some sort of liquidity event where there’s distributions.

So, when you think about the IPO and I was perhaps overly optimistic last year in 2025 but that’s, suffice to say that these companies that were slated last year that are slated this year do have a plan of going public. Private equity can’t indefinitely hold these companies. It’s not going to sell it to itself into a different fund.

They, the ultimate liquidity event that occurs for businesses is when the retail public can invest in it. Not have two or three major like investor holders of a business or private investors. So having the calendar that we do have for 2026 it gives me a lot of optimism, not only for the public markets, but also for the private markets in that these investors are now going to get, have liquidity events similar to the founders and that capital after they buy their yachts and Lamborghinis and vacations and second home, fourth homes.

A lot of that money ends up getting reinvested back into whatever thesis they that they had before. So, an IPO market that is active, that actually has companies come out and I know at least three or four multi-billion family offices that have these positions in some of the companies that are going through IPOs now and in conversations and hopefully they become clients of ours as well.

They just want to reinvest that capital and raise another fund. They want to reinvest that capital and build another business in an adjacent industry. So, capital in, from what I’ve been seeing, as soon as it comes back into the hands of investors, it often gets recycled and goes right back out to the market.

Mary MacNamara  

So fundraising remains tight for emerging managers. What characteristics, sector specialization, smaller fund sizes earlier, portfolio momentum are starting to get LPs attention again?

Jeffrey Fidelman  

I think that we’ll see a trend if we haven’t already started seeing it in access and also niche investing. With hyper specialization and intellectual capital behind the firms access and I’ll address those differently. So, with access, this is the, the community effect that we’re seeing in San Francisco, for example, in New York and different venture-based places in US and outside of us, where you’ll have a lot of the same funds, friendly funds come into similar deals together and take larger positions.

So, it ends up happening is that, and we’ve seen this firsthand, that GPS will be raising capital, meaning like a fund manager will go out and try to raise capital and they’ll actually get interest from a lot of other fund managers. What you have is you create almost, not by design, but what ends up happening is there’s this incestuous relationship between many of the funds where GPs are investors in one another so that they can have a look and co-investment rights through themselves or their funds on anything that one another are looking for.

So that’s why you see a lot of the larger deals, especially as they get later stage, you’ll see a lot of the same names on the cap table. Which ultimately, maybe I can do pros and cons on what that does for the company, but that’s what happens. So having access to these types of funds, I think that there’s a lot of demand also from retail investors to get into SpaceX, to get into Anthropic, to get into Starlink to get into OpenAI, and I’m, I have these emails coming from our GP’s all the time that they’re spinning up SPVs because they have this allocation to Starlink’s $800 billion next offering.

So, I think having that access is starting to be like a tool to start attracting investors that otherwise wouldn’t have looked at you. On the other side, it’s niche focus. And I think we’ll see a big expansion of niche focus where I’m not just investing in AI data centers, but we had a fund that a client of ours who was a quantum technology investor. So, they were investing in quantum computing and kind of ancillary item companies that were related to that industry.

But they were able to attract an incredible amount of capital because they were hyper-focused. The GPs are all incredibly intelligent and well-versed on quantum computing, quantum mechanics, quantum theory, and physics, and they would be able to go in depth on those types of businesses.

So, I think that the idea around niche investing, secondary LP fund, for example, again, one of our clients, but they have a niche focus on late stage venture investors. So, they’ll go to a later stage venture fund and they’re solving a liquidity crunch for its LPs. Do the diligence on the fund, do the diligence on the individual holding companies, and then propose to buy out some of the LP’s positions in there.

Again, a niche focus on what they’re doing. Versus I’m a generalist investor. I have a great network; I have this amazing due diligence process. Those things are still important but between access and niche investing, I believe that’s where emerging managers will be able to pull ahead of the, the entries raising a $15 billion fund.

Mary MacNamara  

Okay. One of the last questions here. Capital continues to flow into AI and infrastructure, but with a narrowing focus, like this niche possibly, what distinguishes the types of applied revenue linked AI models that are still getting funded from a more speculative platforms that are struggling?

Jeffrey Fidelman  

I said something to someone once that I’d rather bet on the track than on any one horse. And what I mean by that is we had this in incredible, like AI was invented a few years ago or whatever came out in a more consumer digestible format through GPT, then all these other platforms that came out. Then vibe, coding and a agentic AI and everything else. And similarly to what a lot of us have been reading that these large companies are implementing AI laying off staff. Fast forward six to nine months. What a horrible idea.

We need to rehire staff. We need to roll back the AI. And I think that’s a telltale sign of what’s happening in the markets with these companies. I truly do believe that AI as a concept, is going to touch all of us every day in multiple points a day in terms of transactions or reading or education or communication or anything and everything else.

That being said, I think people need to recognize that as amazing as AI is in terms of tech innovation, it’s still very early as a technology. So, when I think about AI and investing and where you have the companies you have infrastructure, so energy and computing, data centers and energy providers.

I think that remains relatively strong as infrastructure because as AI continues to grow, the need for compute continues to grow, the need for energy continues to grow. You have that as an ancillary sector that will grow alongside it. And then when you look at AI as as a technology, not as kind of software hardware support.

You likely have the top players continuing to maintain their position as top players Valuation wise, I have no idea if that stays where it is or it comes down or continues going up. But I think they continue to stay top players because once you get to that level, it’s about acquisition or hiring, it’s about staying on top and the middle and lower market of all these new AI services, what ends up happening is that because of the nature of how AI works, you can have the best product ever come out, and then one week later you’ll have a competitor that’s better than you. And then a week after that, the same thing happens.

And I think between the philosophy or the reality of that actually being able to happen and companies almost too quick adoption of AI and trying to replace manual processes as they existed before. I think that’s what’s creating this really weird, I don’t want to call it a bubble necessarily, because I don’t believe there’s a, an overall bubble, but I do think that there’s a lot of froth, not at the top, but in the middle. And I do think that’s if we’re saying that anything is overvalued or if we are calling anything a bubble I can’t say it’s about the entire industry, but I would say somewhere in the middle there’s just too many companies doing too similar of an offering that just, they don’t work yet.

And I think that those are the ones that are overvalued, again, without naming any names, and I just wouldn’t even know them off the top of my head anyway.

Mary MacNamara  

Excellent. So, Jeffrey, thank you so much for coming here today at Cents of Security, everybody. I’m going to put a link to his website. He has some great articles on there for you to take a look at for all the IPO news and the intricacies of the IPO market from anywhere, from fundraising and so on.