Investing Billions - E385: Why Public Markets Need SpaceX, OpenAI & Anthropic

Episode Date: June 8, 2026

What if the biggest opportunity in private markets isn’t finding the next startup—but owning the next public company years before it ever rings the bell? In this episode, I sit down with Matt Witheiler, Head of Late-Stage Growth at Wellington Management, to discuss how the line between public and private markets continues to blur. Matt explains why companies are staying private longer, why public investors are starved for growth, and how late-stage investing differs from both venture capital and public equities. We also explore IPO markets, valuation discipline, liquidity dynamics, and why the best companies often justify paying up for quality.

If you look at where SpaceX is rumored to be going out, we're talking at like $1.75 trillion. You can't not have that in the index. It needs to be in there. And the number is four public companies that are forecasting and have consensus forward revenue growth of 30% or more year over year. When these names, SpaceX, Anthropic, Open AI, etc., ultimately come out, they will be a growth story for a public investor who has really struggled to get growth. Matt, you're at Wellington, which has $1.3 trillion with a T under management. A lot of people are wondering with these large IPOs coming up, SpaceX, OpenAI, Anthropic, what is that going to do to the IPO market?

And what are the second order effects of them? I think it will do absolutely nothing to the IPO market except open the window back up. And the reason I say that is because I have the insight that I can gather from our public team, 1.3 trillion, as you mentioned before, in how much appetite there is to add net new names. There's two components to how these will go. Component one is how will they be sourced? How will we find capital for them? And number two is how will they be received?

How will they trade? And I think on the first one, if you think about $1.3 trillion, we are just one asset manager globally. There is plenty of capital to go out and fund the, call it, $200, $250 billion, maybe even more, that's coming to market in those three IPOs. Secondly, there is insatiable demand for growth stories today in the public market. Those three offer really unique opportunities for growth. Said another way, there's 250 billion in total supply from these three companies. Wellington alone is five times the size of that.

Why do you think there's this meme in the market that you have to go so fast in order to soak up that demand? Yeah, I again, don't believe in that narrative. because if you think about how that $250 billion, let's say, that comes to market is going to be allocated, it's not like the whole IPO book goes to one manager. Like if we are lucky, again, lucky, we get small positions, 3%, 5%, maybe 10% of the IPO book. And so when you think about the total allocation that would be given to a Wellington, for instance, we're talking about, you know, maybe 10, maybe 20 billion total. We manage $1.3 trillion.

And if you look at our 13Fs, you'd see that in some of our larger names, we own north of $25 billion of individual companies. And so the idea that we can put $5 billion into one of those, five into another, five into another, is really, I think, not stressful for us as public allocators. Another big narrative is this direct inclusion of companies like SpaceX and presumably anthropic and OpenAI into these indices and the passive buying of these assets. How do you think about that? And what's your mental framework? At the size at which these companies are going public, it's needed. You're going public and you're a $20 billion, $50 billion, maybe even $100 billion market cap company. It's one thing.

But I think if you look at where SpaceX is rumored to be going out, we're talking at like $1.5, $1.75, maybe $2 trillion. You can't not have that in the index. And so one, I think it needs to be in there. And two, I think that that will provide a backstop and built-in support for the company when they go public because when they do go public, you're going to have a lot of buying from the indexes. At the same time, you are likely to see selling from some of the insiders who got into companies like Anthropic, Open AI, and SpaceX when the company was worth a fraction of what they are going to be worth when they go public.

So I think it's a good counterbalance, actually. You referenced this demand for public growth stocks. Where's this demand coming from? It's coming from the fact that hypergrowth companies are staying private longer. And if you look at the impact that we have seen in the public market as a result of this, if you exclude the AI-specific companies in the public market, you take out the memory companies, you take out the neoclouds, you take out the segment of the public market that is growing very fast, and you look broadly at technology absent those names.

The number is four public companies that are forecasting and have consensus forward revenue growth of 30% or more year over year. If you would have looked at that maybe even as recently as five or six years ago, the number of companies that would be forecasting north of 30% growth would have been at least 10x that. And so the fact of the matter is as companies stay private longer, an increasing amount of growth is only available in the private markets today. And when these names, SpaceX, Anthropic, OpenAI, etc., ultimately come out,

they will be a growth story for a public investor who has really struggled to get growth, except in AI infrastructure names. And I think that's true for both the public investors on the institutional side, the Wellington's of the world. I also think it's true for the retail investors, because I think the retail investors are looking at, how do I get exposure to these trends and to this growth without having to go buy a semiconductor play? In other words, you want to be long AI, but if everything is just in the Mac 7, You need to find other ways to diversify. Even if you look at the MAG7 and you think about how much revenue the MAG7s are deriving from the AI business, it is at max if you set aside Nvidia, 10, 20% of their revenue stream.

It's not like the whole business of Microsoft is all levered to, let's use AI, as a growth story. Instead, it's these next generation of companies that are going to provide the opportunity for the retail and public market investor. get access to this AI-specific trade in a non-influctor way. It's interesting because when you have these memetic trades, so you had crypto back in the day in 2021, today, AI, everybody wants to wrap themselves into this AI wrapper. So as an investor, you have to go into that company and actually do the fundamental bottom of the analysis on how much of an AI company is this. That's exactly right.

And what's really nice about that is unlike crypto, unlike the dot-com days, the AI trade is really based on revenue generation. And so anybody can go out and say like, oh, all of a sudden, I'm pets.com.com. And think that you're an AI business. But if it doesn't show up in the revenue and the revenue growth that that company is seeing, I strongly believe the public market will not buy it. So just wrapping yourself in AI isn't going to solve it. It's going to be wrapping yourself in AI and having the fundamentals to show that you are benefiting from this AI.

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You also have to have a credible path to get there. And you have to have data points and crumbs that we can point to to say you will get there. If you look at SpaceX as an example, one of the narratives around SpaceX and what is driving the interest in that name is you have a launch business that is exciting, probably not a huge TAM, but an interesting business. Then curious about online trading, but haven't taken the first step yet. You're not alone and plus 500 futures is a great place to start the futures markets are moving fast and with plus 500 you could explore popular assets like oil gold s mp 500 bitcoin and more from crypto to commodities there's always something happening platform is super easy to use so you could trade on the go right from your

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and I think those two combined for the kind of the base underwrite of a SpaceX. And then you say, okay, orbital data centers, that's the big opportunity over time. and does Elon have the capabilities to deliver on a very big vision? I think history would say yes. And so you sprinkle that in and that's what gives you conviction that, okay, maybe there is upside in addition to the base business.

We last chatted. You mentioned that several of your LPs and specifically even pension funds are investing into your fund out of their public sleeves. Why is that? I think it's a reflection of the market has changed. When we started this practice now 12 years ago, the thesis was companies were staying private longer. If you believe that's true and you believe that investing in those companies as they stay private longer presents an interesting return potential, then all you have to believe is that we Wellington are capable of executing on that opportunity. And so I think that's the thesis that some of our allocators look to when they are thinking about how do I get access to. the fact that the public market has changed.

And to put a fine point on it, if you rewind the clock 20 years ago, there is a strategy of pools of capital that are exclusively focused on small cap growth investing. And the problem is, is every single year, that universe has gotten smaller and smaller. If you look at the Morning Star Small Cap Index, I believe the data shows that the small cap index from 2018 to today has shrunk by 15% on that Morning Star. And so the universe of small cap is shrinking. And the reason it's shrinking is not because small cap isn't a thing. It's because the small cap opportunity set is in the late stage private market.

I think it's even worse. Not only is it contracting and companies are saying private longer. The ones that are actually going out are lower quality. I had this very discussion with the CIO of Hurtle Callahan, which manages over $20 billion. And his whole thesis is the reason that the small and value trade popularized by Fama French through their research. The reason that has performed so poorly is because fundamentally the companies that are public that are small and value are fundamentally just different companies. They may be failed SPAC transactions. They may be broken deals. They may be companies that have had this kind of

massive fall versus 20 years ago. You had the Amazon's and the Google's going public early. And this was those small cap companies. So if you take a step back and you think about, okay, why are we investing in this sector? You're trying to get. get exposure to technology, to disruption. If 20 years ago, the exposure to the most disruptive companies with these 30, 40 percent growth rates were in the public market. Today, it's in the private markets. If you're looking to keep your asset allocation the same, you have to actually shift your exposure into private markets. I think that's right. As the private markets have developed, the risk associated with investing in the private markets has changed as companies

stay private longer. It's one thing to say, I'm going to invest in a private company that has two people in a PowerPoint presentation. It's another thing to take the strategy that we take on, which is we're going to invest in the next generation of public companies while they're still private, and we're going to identify those by saying they have mature revenue streams of at least 50 million, that they're growing fast. We're going to find the assets that have just a different risk profile than speculatively hoping that something will work out from two people, a PowerPoint presentation, working out of a garage. And yes, our return profile may look different. Early stage, hopefully you get 100 X return. That makes your fun math work. Late stage, we are taking less upside

potential, but at the same time, we're taking on way less risk, in my opinion. I know your fundamental investor, you underwrite these companies bottoms up. Is there ever a place to be purely a momentum investor, knowing that the company is going to go public and there's going to be a bit for it? I have so many thoughts on this, but my high-level thought on this is it is impossible impossible to be a momentum or value investor in the late stage private market. And the one reason for that is because you do not control your liquidity, period, full stop. So you may be thinking you're investing or behind a momentum trade, but maybe the company decides to go public later than you anticipated and the momentum trade fails.

You're stuck in this position without liquidity. Same thing on the value side. It's awesome if you can get an incredible value business in the late stage private market. But if there's no exit path to that company, because it's not growing. fast enough or doesn't show enough profitability or have an attractive enough market to be able to go public, then it doesn't matter what price you paid because you're never going to get out of that position. And so I strongly believe that you can't be a momentum player in the stage of investing that we do. DPI last couple of years, 9% according to Alligator Training Institute.

The Swenson model, which was the private markets model back in the day, model 24%. And LPs are clamoring for DPI. most people see that changing. I have a contrarian view on this. I don't think DPI is going to be solved in the venture space, at least not at the company level. And the reason for that is venture continues to be an access class, meaning the very best funds get to pick their LPs,

and the very best entrepreneurs get to pick their VCs. So the people in the venture asset class, unlike probably any other asset class in the world, the people that matter and the people that make the decisions are the founders of the very top companies. If the founders of the very best companies want to stay private longer, the entire ecosystem is going to orbit around that strategy and companies will continue to stay private longer. I totally agree. They will continue to do that and they will be selective on who they let under their cap table. As a private company, you get to choose your investors. Do I want to work with Wellington or not?

As a public company, you have no say on who comes into your business. And so I think the best entrepreneurs want to be selective on who they partner with in their journey from going from private. it to public. And I think that's one of the incredible advantages that I have as a portfolio manager at Wellington is our ability to deliver a differentiated value to those companies. You're arguably in the most competitive part of the entire market. You have formidable competitors, whether it's Andries and Horowitz, Sequoia, Thrive, name your top tier firm. How do you beat these firms out? There's this notion of collaboration and competition, so co-opetition to some degree. But I think the The reason that oftentimes we are leading those rounds or joining some of the firms you mentioned in rounds that they're leading and entrepreneurs are choosing to work with us as well is because we offer two fundamentally different value propositions from that pure universe.

Those two are one. We are public market experts. We manage $1.3 trillion. We've been around for almost 100 years. And in your journey to go public, wouldn't it be great if you had somebody around the table who could help you prepare to go public and be received in the best possible way. One. Two, we manage $1.3 trillion on the public side. And so what that means is that for us, the IPO is not the end of the story. It's the continuation of the story. That's like an order of magnitude difference between how much you invest in the public

versus private. On the private side, we've since inception invested in about 120 companies. We've had 58 of those go public, half the portfolios IPOed. In those 58 companies that have gone public, We on the public side invested 8.6x the amount that we invested on the private side in those same companies in the first year post IPO. When a company can go public, this concept has evolved over the last couple decades. In the beginning, companies would take four or five years to go public. That's the origin of the four-year vesting schedule. What's the minimum viable company size or company metrics that you need to go public today? It's a really complicated answer because I think it is very sector.

and company specific. In general, you do not want to be, per our prior conversation, a small or microcat business in the public market. You can do it. And it's not to say that all those companies perform poorly because they don't. But it is a much harder place to be as a public company at the call it sub two or three billion dollar mark than it is to be a 10 plus billion dollar public company. So I think there needs to be some level of critical mass around your market cap in order to

have sufficient volume and liquidity to get somebody like us investing in your business. If you think about being very small, the problem for a large asset manager like us, if the maximum amount of capital we can put into one of those small cap businesses is $5 or $10 million, because we don't want to own too much of the business, if you're talking about $5 or $10 million on a base of $100 billion, it doesn't move the needle. And so there has to be some level of gravity that makes it so that we can spend time, attention, and make decisions around investing in some of those smaller companies. I had the CEO of I Capital, Lawrence Calcano, talk about this tens of trillions of dollars

from retail going into the private markets. How do you see that affecting your job? The private markets are huge. So I think the inflow of capital into the private markets will impact a whole. spectrum of what goes on. What we do, late-stage private companies, is somewhat capacity constraint. And so I think that in general, there may be some more, I guess, capital sources for late-stage private companies, but the market won't support a massive inflow of capital into this segment of the private market. Like we talked about before, companies are selective on who they let in.

So de novo firm who attracts a lot of capital to go to private market investing in the late stage private market may have a more challenging time of accessing the top quality companies. And so in my opinion, it is more likely that the inflow of private capital impacts this stage a little bit where we invest out of the late stage growth side, but impacts other segments of the private market in a disproportionate way. You're constantly interacting with the CEOs of the greatest private companies in the world. do these rounds come together? How much of it is driven by valuation? Just tell me about the inside of a hot round. How does that work? First off, if you're showing up to the hot round while the hot round is being raised, you are dead on arrival. You got to get there two years before that hot round is being raised. And if you look on average across our portfolio, we've known our companies for like a year and a half before investing. And so for us, it's about relationship

building. It's about demonstrating the value ad we can deliver on that expertise and on that capital support post-IPO and using that to be able to be in the conversation around a hot round. Now, when it comes to how investors are selected, once you are in the discussion, oftentimes, yes, a company has a target price in mind, but I would say that if you think about a private round and the amount of dilution that these late-stage private companies are taking, if you are raising and you're a $60 billion valuation and you're raising a billion dollars, your amount of dilution is not very big. And so whether you raise it 60 billion pre-money evaluation or $63 billion pre-money

valuation isn't impacting anybody on the cap table. So instead, companies are not optimizing towards price. They're optimizing towards partners. Now, sure, there's a range. If somebody offers you $63 billion and everybody else is at $20 billion, yeah, you probably take the $63 billion. But if you're within the range, I don't think price is what wins the deal. There's this thought experiment about this perpetually private high-growth company.

Arguably, Palantir and SpaceX really pushed that limit towards. I think Palantir was 17 or 18 years. SpaceX, I believe, is 22 years. Will there ever be a perpetually private company? Maybe a few, but I do not think that will be the norm. And the reason I don't think that'll be a thing is just numbers. So let me take you through why. If you look at the private market, everything in private,

so what we do in late stage growth, what buyout funds do, what leverage buyout funds do, what real estate funds do, everything in the private market, $2 trillion of transaction volume a year in the private market. If you look at how that compares to what happens in the public market, the public market in that same 12-month window transacts $126 trillion. So we're not talking about like a small delta from private to public. We're talking about a huge delta.

So why does the SpaceX go public? Because at some point, if your market cap, SpaceX, is 1.5 or 1.5, 1.75 or $2 trillion, there is not enough liquidity in the private market to get your employees paid, to get your founders paid, and maybe most importantly, to get your investors paid. And so these companies will go public if for no other reason than to provide liquidity and that liquidity is not available in the private market and won't be anytime soon given that magnitude of difference. Again, 2 trillion versus 126 trillion. said another way, even though there's an enormous amount of private capital, $2 trillion, at some point, if a company is high growth, it keeps on compounding. At some point, SpaceX becomes trillions of dollars.

And at some number, maybe it's $2 trillion, maybe it's $1 trillion, maybe it's $5 trillion. There's just not enough capital in the private market. You have to raise from the public markets. It has to go that direction. And I think that's been, since I've been doing this for over 10 years now, this has been maybe one of the most interesting shifts, which is, if, If you think about how the public market is evolved, when I started here in 2016, there was not a single trillion-dollar company. It wasn't until 2018 when Apple eclips the trillion-dollar public market cap number.

If you look today in the public market, as of right now, there are 14 publicly traded companies that have market caps north of $1 trillion. And Vidae has a $5 trillion market cap. And so I think it's just a realization that the public market can support very, very, very big companies. And those very, very big companies are getting bigger and bigger. And as a result, the private markets, where a lot of this value is being created, will ultimately graduate to the public markets just at a different scale than it did 10 years ago when I started here. It reminds me of the character who played Sean Parker telling Mark Zuckerberg, a million dollars isn't cool. It's a billion dollars. Now a billion dollars isn't cool.

It's a trillion dollars. Exactly. Like, again, when I started here, it would have been hard. for me to imagine investing in a company like Anthropic at $150 billion because there was no outcomes in the public market of a company starting, being venture-backed and going public, and being worth $300 or $450 billion, which is kind of the underwrite that we would need to assume. But today, there are, like I said, more than a dozen companies with more than a trillion-dollar market

cap. And so the market has definitely evolved. You've been deploying into the private markets for a decade. If you could go back to 2016 and you could get a younger Matt, one piece of timeless advice, only one. What would that be? The one piece of advice is you have to be valuation disciplined, but you can't be a value investor. And so valuation doesn't solve everything and you are better off slightly stretching for the best companies than compromising the company quality to find a better price. Is that because of the asymmetry in these companies?

In other words, even if that's the wrong strategy, 50% of the time, it's still the winning strategy? I think it's because the companies that are the best are the ones that are growing the fastest, and the ones that are growing the fastest, if they can maintain that growth rate, grow into the price really quickly. Now, the mistake you make is either one, you pick the company that can't sustain growth rate, in which case you overpaid and you will continue to overpay. And number two, if you wildly overpay, you pay five times the market or three times

the market. It takes too much growth to grow into that valuation. So it is that sweet spot of execution and how much forward execution risk are you willing to take and how quickly is the company, if they can execute, going to grow into that value. What's your biggest miss in the last decade? SpaceX. I mean, I think we talk about this a lot as a team. There is getting something short-term right, long-term wrong, and I believe SpaceX is the best example of that for our strategy investing.

When we looked at SpaceX, the company was a launch company and had plans to build Starlink, but it was not up and running, was not operating. And at that particular moment in time, the underwrite for us would have been, we need Starlink to work in order to make the return math work, because the launch business itself wasn't going to deliver the returns we needed. And that was not a risk as a late stage private market investor that we were willing to take on, that they can get satellites in the sky to communicate and beam stuff back to Earth. Now, what we got wrong was Elon, and he figured it out.

And that is why it was a mistake long term, but maybe in the moment was the right decision. I think that's exactly why Peter Thiel has this rule, which is don't bet against Elon, because the numbers never work. So you have to create a singular rule for a singular person in order to explain why you should invest in this company. I think that's totally right. And if you can identify those instances where the execution will work, even though it's really hard, then you will do well. But the problem is that there's one Elon and there are hundreds of entrepreneurs who are not Elon. And so picking that one out of the hundreds is really tough. Well, Matt, this has been an absolute masterclass.

Thanks so much for jumping on the podcast. Thank you, David. Thanks for having me. Really appreciate it. Thank you.