The IPO Mendoza Line, and 5 delightful venture charts
You must be this tall to go public
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Thursday. News that Perplexity is “bidding” for Chrome in advance of Google possibly being forced to divest its browser came after the AI search startup tried to get its hands on browser tech. The Information reports that Perplexity talked to both The Browser Company (Dia) and Brave about a deal. OpenAI has also taken a look at The Browser Company.
Perplexity wants to own a larger share of the browser market than it has garnered so far with its own Comet entry because browser share can be converted into search share. Just as Google! Anyway, Perplexity also soft-pitched rebuilding TikTok domestically back in March, so perhaps we need more grains of salt when it comes to the company’s speech play. To work!
Elsewhere in the economy, wholesale prices (PPI) rose 0.9% in July, far ahead of an expected 0.2% gain (+3.3% YoY, ahead of an estimate of +2.5%). If you want lower rates, you can lower inflation. This is the opposite. Stocks dipped as the vibes shifted from a feeling that we were heading for a September rate cut to a less certain stance. Given that Chinese exporters aren’t lowering prices, tariff costs have to show up somewhere. To work! — Alex
📈 Trending Up: Only the best … you don’t say … European dealmaking … Google AI on Oracle’s cloud … data centers in China … making choices … debt fights … heatwaves in Europe …
📉 Trending Down: Prior work … xAI’s founding team … free speech in Russia … SMBs … consumer spending? …
You must be this tall to go public
Institution-focused crypto exchange Bullish had a banger IPO this week. After raising its IPO price range and pricing above the raised interval $($37 per share), it opened higher ($95.69 per share), and rose even more before closing its first day worth $68.00 per share, not quite good enough for a day-one double up.
Seeing another IPO in 2025 do well shouldn’t surprise at this point. We’ve seen a number of ripping public debuts this year, as investors appear hungry to buy into growth-oriented industries via new public offerings. Circle, CoreWeave, and Bullish are good examples of the trend. You could include Figma in there too, if you want.
What is surprising about Bullish’s IPO is how small the company is in revenue terms. With Bullish, we want to pay attention to its adjusted revenue, which strips out asset sales that would otherwise count as revenue. So, using the clearer metric, how big is Bullish?
Q1 2025 adjusted revenue: $62 million (+17% YoY)
Q1 2025 adjusted revenue, annualized: $248 million
Market cap as of this morning: $9.94 billion
That number is more than double the minimum revenue I was told companies need to go public when I first learned about such things. However, the $100 million requirement to list comes from a time so ancient that it was supposed to be stapled to several quarters of consistently rising profitability. How quaint.
While Bullish was far larger during its listing price than old norms dictated it needed to be, it’s also far smaller than many folks think companies have to be to go public today.
This came up yesterday on the podcast, a venture roundtable show for which I wrote the docket. From the conversation on IPO minimums:
Tomasz Tunguz: “To go public, you probably need $400 million in trailing [revenue] or something of that order.”
Jason Calacanis: “[The] number I hear is [that] you have to be at $1 billion in revenue, growing 30% year over year.”
Why are minimum revenue expectations so high? Tomasz made two arguments:
Tomasz Tunguz: “The large asset managers need to deploy pretty significant check sizes at IPO. And so if you’re at $100 million [worth of] trailing [revenue], maybe you’re worth a billion [dollars]. Maybe you float 20% [in] a $1 billion offering. Can’t really put [a] big amount of money into that IPO, so the juice isn’t worth the squeeze.”
Tomasz Tunguz: “If you raise a round of private capital [the] legal costs [run] $100,000 to $500,000 […] if you go public, as a result of all the regulatory challenges,] it will cost $15 to $25 million. And so if [you have] $100 million in trailing revenue, you can’t spend 15% to 25% of your revenue to close a financing.”
The first argument reduces to a market cap point. If your revenue is only this big, your valuation can only be this big, leaving you too small to matter to potential institutional shareholders. The types of investors you court during your roadshow.
Fair enough. The second argument is merely one of cost, though I would add that IPOs can raise more than enough to offset their outlays, Tunguz does make a point that listing is not cheap.
And yet: