In tech circles, a lot of people are wringing their hands right now over how much venture capital is going to a small handful of companies. The same names come up every time: OpenAI, Anthropic, SpaceX, Anduril, Databricks. The usual complaint is that too much capital is piling up at the top and that the venture market has lost its balance.
That is true, but it misses the larger structural change underway and the inequality problem it is creating. What we are watching is the replacement of the traditional IPO path with a private-market system that now carries many of the most valuable growth companies far beyond the point where they once would have gone public. These are no longer ordinary late-stage venture rounds. They are increasingly private-public hybrids, with mega-funds, mutual funds, sovereign capital and other institutions effectively front-running what used to be the public market.
There are obvious reasons companies prefer this route. A deep private-market ecosystem now gives elite businesses much of what public markets used to offer: huge pools of capital, active secondaries, liquidity for insiders, and sophisticated investors willing to keep writing larger checks. If a company can raise billions privately, provide selective liquidity to employees and early backers, and retain control, there is far less urgency to subject itself to public markets.
But the deeper reason this system keeps expanding is regulatory. Going public has become too burdensome, too litigious and, for many companies, too irrational. Sarbanes-Oxley added costs and compliance obligations that fall especially hard on smaller public companies. The 1933 and 1934 securities laws, combined with accredited-investor rules, keep the most attractive private securities largely reserved for institutions and wealthy individuals. This effectively makes it illegal for much of the middle class or the poor to participate directly in the biggest wealth creation events in modern history. At the same time, mass shareholder litigation has created an environment where one disappointed shareholder and an aggressive plaintiffs’ firm can create enormous pressure, even around relatively minor issues.
That matters most to the typically smaller high growth companies of the market. A giant company may be able to absorb years of compliance costs and a major lawsuit, but a smaller public company certainly cannot. A business with a $100 million market cap can be badly damaged by a $10 million legal fight, even if the claims are weak. So companies and their boards respond rationally. They stay private longer, avoid unnecessary disclosure, reduce litigation exposure, protect sensitive strategic information, and keep management focused on building rather than defending.
The result is a market that increasingly works best for the people already inside it. Earlier generations of great technology companies like Microsoft, Cisco, Intel, and Amazon delivered much of their upside in public markets, where ordinary investors could participate. Today, a much larger share of that value creation among companies like Open AI, Anthropic, and SpaceX (among others) is happening before the public gets access, if it gets access at all. The public may still get the tail end of the story, but more of the real upside is being captured privately by institutions, family offices, sovereign wealth and wealthy individuals with privileged access.
That has consequences beyond fairness. It changes capital formation itself. On paper, private markets can look efficient. In practice, they come with toll collectors at every stage, with placement agents, intermediaries, secondary platforms, specialized funds and structured vehicles all taking their cut. Entrepreneurs and managers pay for that through lower effective valuations, more friction and less liquidity. Meanwhile, the public markets lose what once made them so important – broad participation, transparent price discovery and open access to economic growth.
You can already see the effects in the shrinking public market itself. The long decline in the number of public companies points in that direction. A market once broad enough to support the idea of the Wilshire 5000 now looks far narrower, with only about 3,100 companies in the index.
Critics will say companies have good reasons to stay private, and they are right. Public markets can be punishing. Quarterly scrutiny often rewards caution over ambition. Disclosure rules are burdensome, and early-stage venture capital has hardly disappeared. But that does not answer the larger concern. The issue is what happens when all of those incentives compound over time and create a durable system in which the best growth companies spend more of their life cycle outside public ownership.
That system can be changed, but only if policymakers are willing to confront the reasons it emerged. First, shareholder tort reform should make frivolous litigation more costly, including loser-pays rules where appropriate. Second, individuals should have broader access to private companies and pooled private-market vehicles rather than being shut out by rules designed for another era. But the most important opportunity is the creation of a U.S. sovereign wealth fund.
Social Security was created in response to one of the great fears of its era, that millions of Americans would grow old, or become disabled, and fall into poverty. It was downside protection for a society shaped by the Great Depression. Corporate and union pensions later extended that logic by giving a broad slice of the country a stake in economic growth they otherwise would not have captured. But those pensions have receded, even as the biggest gains in modern capitalism are increasingly being created in private markets that most Americans cannot access.
That is why a sovereign wealth fund is so compelling. It would not “take” wealth after it has been created. It would invest in society alongside the people already benefiting from these rapidly appreciating assets so that when the winners of the AI and technology age win, the country wins with them. This is a capitalist answer to inequality. More than 90 countries have already created sovereign wealth funds, including Norway, Saudi Arabia, the UAE, Malaysia, Nigeria and Peru. U.S. states such as Texas, Alaska and New Mexico have also built versions that have strengthened public finances and broadened long-term economic benefits.
The deeper story here is that America has quietly built a parallel market for its most valuable companies, then limited access to that market to the people and institutions already closest to capital. If that continues, the private market will work very well for those already inside it, while inequality keeps widening for everyone else.
The choice is whether to respond after the fact through endless redistribution fights, or to build a structure that lets more Americans participate in wealth creation on the front end. A sovereign wealth fund would not replace capitalism. It would extend capitalism’s upside to people the current structure leaves out. The question is whether we are serious enough to do it, and truly address that the root cause of inequity is not that we tax billionaires too little; it’s that we don’t allow the vast majority of Americans to participate in the wealth as it is being created like the 1% and corporate and union pensions do via VC and private equity funds and the firms they back.
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