The Public Markets Need an Entry Point for Smaller Companies

A healthy public market needs an entry point. If the bottom rung of the ladder keeps moving higher, fewer companies get the opportunity to begin climbing. Today’s emerging growth companies are supposed to feed tomorrow’s middle market and, ultimately, tomorrow’s large-cap market.

Yet the strength of the broader IPO market is not reaching the entrepreneurial end of the market in the same way. During the first half of 2026, the Lucosky Brookman DataDesk tracked just 13 IPOs in the microcap and emerging growth segment, raising approximately $424.6 million. Nearly half of that capital came from one transaction worth over $200 million.

For the entrepreneur trying to raise $15 million or $20 million to build something, that broader IPO boom may not feel like much of a boom at all. The question is whether we can maintain strong public markets while preserving a viable entry point for legitimate entrepreneurial companies.

Why The Entrepreneurial End Of The Market Matters

Why should anyone outside the microcap ecosystem care? Because this segment plays an important role in the broader capital formation system. Emerging growth companies are where entrepreneurs attempt to turn private businesses into public companies. They are biotechnology companies trying to finance another stage of development, technology companies trying to commercialize intellectual property, manufacturers trying to expand capacity and businesses that may not yet be large enough to attract the biggest institutional investors but nevertheless need access to growth capital.

Some will succeed spectacularly and others will not. That is entrepreneurship. Public markets have historically provided one avenue for those companies to access capital, create liquidity for investors and employees, use publicly traded stock as acquisition currency and potentially grow into larger enterprises.

If that part of the market becomes disconnected from the strength occurring above it, we should pay attention. The next generation of public companies depends, in part, on whether smaller companies have a viable opportunity to begin that transition.

This Is Bigger Than Investor Appetite

It would be easy to explain the divergence by saying investors have simply become more selective, and there is certainly some truth to that. Markets evolve, investors demand quality and companies seeking public capital should be expected to meet appropriate standards. But the changes occurring in the emerging growth market go beyond investor appetite.

The pathways into the senior public markets have become more demanding for smaller issuers. Listing standards have increased. Public float mechanics have evolved over time. Investor concentration, ownership structure, governance, management, advisers and other qualitative factors receive greater scrutiny. Those changes have a much greater impact on a smaller company trying to enter the public markets.

A $500 million transaction can absorb costs, delays and structural requirements differently than a $15 million or $20 million transaction can. The economics are different, the investor base is different and the margin for error is different.

There are legitimate reasons for exchanges and regulators to focus on market integrity and investor protection. Nobody benefits from bringing companies public that are not prepared to operate responsibly in the public markets. But access and integrity should not be viewed as mutually exclusive goals.

The Market Is Finding Other Routes

One indication of how dramatically the market has changed is what companies are doing when the traditional IPO is not available or does not make strategic sense. We have seen increased use of direct listings, uplistings and cross-listings, and those pathways are becoming a larger part of the emerging growth ecosystem.

That is healthy. Companies and their advisers should evaluate the full range of options available rather than treating an IPO as the only definition of success. But we should not mistake adaptation for broad-based market strength. Entrepreneurs are extraordinarily good at finding another route when the obvious route becomes difficult. The growth of alternative pathways tells us that the market is adapting. It does not change the underlying question of why the traditional entry point into the public markets has become so difficult for smaller companies.

Preserve a Viable Pathway

For companies and their advisers, the practical question is which pathway makes strategic sense given the company’s capital needs, investor base and readiness to operate publicly. Evaluating the full range of options should include the economics of the transaction and the responsibilities that follow it.

For exchanges, regulators and other market participants, the question is how those requirements affect legitimate smaller issuers. We should understand how many companies begin the IPO process but never reach the public market, and whether entrepreneurs are choosing alternative pathways because those structures are strategically superior or because the traditional IPO has become inaccessible.

Don’t Lose The Bottom Of The Market

There is plenty to be optimistic about in the U.S. capital markets. Capital is being raised, large transactions are getting done and the SEC is focused on capital formation and examining reforms designed to make the public markets more efficient and accessible. That progress should be recognized.

Encouraging more companies, especially small and growing companies, to go public and stay public is an objective I strongly support. But if we are going to measure whether we are succeeding, we need to make sure the strength at the top of the market is also reaching the entrepreneurs and emerging growth companies at the bottom. If the objective is to get more companies public, particularly earlier in their lifecycle, we cannot leave that part of the market behind.

The next generation of American public companies has to start somewhere.