This year was supposed to be the year the IPO window reopened. SpaceX's offering in June, Anthropic's planned IPO and Israeli companies like Cyera raising at valuations in the tens of billions painted a picture of a market ready to pay for growth again. Yesterday's inflation data is a reminder of something easy to forget: the window did not open thanks to the companies, but thanks to interest rates.
When the Fed starts talking about a half-point hike and the 10-year US Treasury yield passes 5%, investors' math changes. A company losing money today and promising profits in five years looks less attractive when you can get 5% a year without risk. That is exactly what happened in 2022, when rate hikes wiped out much of growth companies' value and the IPO window closed for years.
The biggest risk is for companies that raised at high valuations over the past year. A round at an inflated valuation is a promise that is hard to keep: to go public without a down round, the company must grow into its price. When rates rise, public-market multiples fall and the gap between private valuation and what the market will pay widens. Many companies may find the only way to go public is at a lower valuation, and so will not go public at all.
There is also an indirect effect on jobs. Companies that realize their next raise will be harder start saving now, which is exactly what we are seeing in the current wave of layoffs in Israeli tech, in which development centers in Israel are hit first. Higher rates will accelerate that trend.
This does not mean the market will close tomorrow. One quarter-point hike does not change the whole picture, and Anthropic's IPO will be an important test of investor appetite. But executives of Israeli companies planning to go public in 2027 should prepare for a scenario in which money is more expensive, investors are pickier and the valuation from their last round is a ceiling, not a floor.
