Venture capital (VC) serves as a critical engine for high-growth startups, helping drive companies from seed-stage innovation to initial public offering (IPO) readiness. On average, roughly one-third of annual US IPO proceeds have come from VC-backed companies over the past decade, underscoring their significant influence even in challenging periods. This article explores how VCs help shape the IPO pipeline, examining the VC lifecycle, sector trends, challenges, and opportunities, as well as how the Renaissance IPO ETF can potentially capture growth in this space for investors.
Introduction to Venture Capital and the IPO Lifecycle
Venture capital involves investing in early-stage, high-potential companies with the goal of significant returns through exits like IPOs or acquisitions. For VCs, IPOs are a preferred exit, delivering visibility and high returns, as well as providing liquidity for early backers. VC-backed companies fuel innovation in sectors like technology and healthcare, with the US serving as a key hub for incubation.
The journey from startup to IPO is a multi-stage process, with VCs providing critical support across the entire spectrum:
- Seed Stage: Funding to validate ideas and build prototypes.
- Early Stage: Capital for product development and market entry.
- Growth Stage: Investments to scale operations and expand markets.
- Pre-IPO Stage: Late-stage funding to prepare for entry into the public market.
VCs play an important role in their portfolio companies’ IPO readiness, offering mentorship, governance, and networks. These are key in helping startups refine leadership, strengthen financials, and achieve milestones like profitability or market traction.
The timeline from private to public often spans several years, especially following the JOBS Act (2012), and companies experience immense growth during this period. The Renaissance IPO ETF taps into this dynamic through its strategy of holding companies for three years post-IPO, capturing the early public growth phase of these VC-backed companies.
Source: Renaissance Capital.
Geographic and Sector Trends in VC-Backed IPOs
Due to its mature financial markets and investor appetite for high-growth ventures, the US has long stood as a global powerhouse for VC-backed IPO activity. Startups in California have been a significant driver of activity, accounting for nearly half of VC-backed US IPOs over the past decade, according to Renaissance Capital data. From 2015 to 2024, California-based companies, particularly from Silicon Valley and the broader Bay Area, generated 45% of VC-backed IPO volume in the US, fueled by the state’s robust VC ecosystem, proximity to top-tier talent, and innovation hubs.
By sector, healthcare has dominated VC-backed IPO activity by a large margin, accounting for 62% of deal flow over the past decade, according to Renaissance Capital data. Biotechnology and medical devices have benefited from strong investor demand for innovation in drug development and healthcare solutions. Technology has also been an active source of VC-backed IPOs, producing about 30% of deal flow but nearly 50% of proceeds, driven by large listings from highly-valued software, artificial intelligence (AI), and fintech unicorns.
Source: Renaissance Capital.
Opportunities and Challenges in VC-Backed IPOs
Venture capital often fuels transformative technologies, and we believe VC-backed IPOs present significant opportunities, particularly through innovation in high-growth spaces like AI, fintech, and healthcare. There are startups using AI to reshape a wide range of industries with scalable platforms, and others revolutionizing areas like finance and banking with digital-first models.
Despite these opportunities, VC-backed IPOs can face challenges. Growth names are particularly sensitive to factors like interest rates, investor sentiment, and risk appetite. As seen in the post-COVID drought, market volatility and high rates can weigh on new issuance from VC-backed companies. High private market valuations, like those awarded during the zero interest-rate policy (ZIRP) era in 2020-2021, can also cause these companies to clash with public investors. Regulatory hurdles, geopolitical tensions, and other headwinds add complexity and costs, which can further complicate IPO timing.
Selection of Notable VC-Backed IPOs
Many high-profile IPO candidates have come to market with VC backing. Below we highlight a selection of some of the biggest names from recent years.
- Uber (2019 IPO): Ridesharing pioneer Uber raised $8.1 billion at an $82+ billion valuation in its May 2019 IPO. Backed by influential VCs like SoftBank and Benchmark, Uber used venture funding to scale globally and disrupt the transportation ecosystem.
- Airbnb (2020 IPO): Home-sharing platform Airbnb went public in December 2020, raising $3.5 billion at a $46+ billion valuation. With funding from VCs like Sequoia Capital and Founders Fund, Airbnb was able to scale its short-term rental platform to the global market.
- Rivian (2021 IPO): Rivian, an electric vehicle manufacturer, raised $11.9 billion in its November 2021 IPO, valued at $76+ billion. Rivian leveraged venture funding to bring its electric trucks and SUVs to commercialization.
- Instacart (2023 IPO): Grocery delivery giant Instacart raised $660 million in its September 2023 IPO, valued at $9+ billion. With venture backing led by Sequoia Capital, Instacart expanded its delivery network and became one of the most recognizable brands in its market.
- Reddit (2024 IPO): Social media platform Reddit went public in March 2024, raising $748 million at a $6+ billion valuation. VC funding from firms like Tencent and Quiet Capital fueled Reddit’s growth in user engagement and advertising, positioning it as a social media leader.
- Chime (2025 IPO): Mobile banking platform Chime went public in June 2025, raising $864 million at an $11+ billion valuation. Chime used funding from a suite of VCs to scale its no-fee banking services.
The Renaissance IPO ETF: Capturing VC-Backed Growth
While venture backing is not part of its strategy, the Renaissance IPO ETF (ticker: IPO) offers investors a unique opportunity to tap into the growth of VC-backed companies entering public markets. By tracking the Renaissance IPO Index and offering a gross and net expense ratio of 0.60%, the ETF aims to provide a cost-efficient, passive approach to accessing high-potential IPOs, many of which may benefit from VC expertise and capital.
The ETF’s methodology often tilts towards the most active spaces in the IPO market, like technology and consumer, but it reduces the risks associated with single-stock investments. Its focus on new stocks allows the ETF to capture innovative companies, including those driven by VC investment, and provides a complement to core equity holdings. For investors seeking exposure to the VC-IPO ecosystem without the complexity of individual stock selection, the Renaissance IPO ETF may offer a compelling solution.
Final Thoughts
Venture capital helps fuel the IPO pipeline by transforming startups into public market leaders through capital, expertise, and credibility. Despite challenges like market volatility and high rates, the VC-IPO pipeline is poised for growth in the coming months, with stabilizing economic conditions and a robust lineup of AI, crypto, and other unicorns. The Renaissance IPO ETF is well-positioned to capitalize on this resurgence, offering investors access to the next wave of innovative companies, including those with VC backing, in their most transformative phase of their public lives.
Investments in the Renaissance IPO ETF, symbol “IPO”, and the Renaissance International IPO ETF, symbol “IPOS” (the “ETFs”) are subject to investment risk, including possible loss of the principal amounts invested. Investors should consider the investment objectives, risks, charges and expenses carefully before investing.
For a prospectus and/or summary prospectus with this and other information, please visit the document center at etfs.renaissancecapital.com. Read the prospectus carefully before investing.
The ETF invests in companies that have recently completed initial public offerings. These stocks are unseasoned equities lacking trading history, a track record of reporting to investors, and widely available research coverage, which may result in extreme price volatility. Due to a greater number of IPOs in certain segments, the ETF may also be subject to information technology and financial sector risk, and small and mid-capitalization company risk.
Some of the companies mentioned in this article may be held by the fund. For a list of the fund's top 10 holdings, please click here. Fund holdings are subject to change.
Foreside Fund Services, LLC, is the distributor for the ETFs. For additional information, contact Foreside at 1-866-486-6645.