The IPO market is known for boom-bust cycles, but the past year represents a break with that pattern in many ways.

The class of 2021 public offerings was massive in dollar terms. There were also more offerings, and the manner in which companies list changed. Moreover, the new crop of deals showed in dramatic fashion that the trend of startups staying private for longer doesn't mean they will stay private forever.

This year's IPO market will be a tough act to follow. More than 1,000 companies tapped US public markets in 2021, raising a grand total of $306 billion–more than the previous three years combined, according to PitchBook data.

The extraordinary performance suggests that the market will be hard-pressed to surpass totals minted in 2021. But it also put a spotlight on how long-term declines in public companies and a buildup of unicorn startups haved created a natural pressure to go public. This year, the market found its release valve.

Several startups that had made the choice to stay private longer decided that 2021 would be the year they finally made the jump to Wall Street. Those ranks included US household names like Roblox, Rivian and Robinhood, as well as supersized foreign issuers such as China's Didi Global, South Korea's Coupang and Brazil's Nubank.

The top 25 companies accounted for $650 billion in total exit value, or more than half of the total exit value of US public listings this year.

The rapid rise of SPAC IPOs in 2020 led to speculation that these deals could fail to live up to their promise. That prediction has not borne out, as blank-check firms have largely succeeded in finding merger targets.

In 2021, 175 SPAC mergers were completed for a total deal value of more than $63 billion. To put that sum in perspective, it's more than the total raised in US IPOs in 2019.

In some ways, the class of companies that blank-check firms took public was different from the typical IPO set. Several companies that had no sales to speak of took the SPAC route, especially makers of next-generation mobility tech such as electric vehicles and aircraft, as well as autonomous driving software and hardware.

However, SPACs have also proven to be a viable alternative for companies that could conceivably pull off an IPO, as evidenced by deals for Singapore's ridehailing leader Grab and consumer fintech company SoFi.

Why did so many companies go public? An old Wall Street saying offers one answer: "When the ducks are quacking, feed them." New offerings are being served up to Wall Street at a time when the market's appetite for stocks is especially strong.

Investors have been paying more for US equities than at any point since the dot-com boom. The cyclically adjusted price-to-earnings ratio shows that the stock prices in the S&P 500 relative to historic earnings are at the highest level in 20 years.

Companies backed by venture capital firms went public at a combined value of more than $840 billion, constituting a large majority of the $1.22 trillion in overall exit value through public listings.

These mega-IPOs meant that some of the largest holdings of VC firms became liquid for the first time, presenting the opportunity to harvest billions in gains. Looking ahead, the increased flow of capital into VC funds paves the way for a sustained supply of companies that are well-positioned to go public.

Some of the sheen has started to wear off the IPO market. After a stellar run in late 2019 and early 2020, shares of newly public venture-backed companies have underperformed blue-chip stocks this year, according to the PitchBook index of venture-backed IPOs.

Still, large listings have continued near the end of the year. Samsara went public this week at an $11.5 billion valuation based on shares outstanding. And earlier this month, Nubank raised $2.6 billion in its dual-IPO and was valued at $44 billion on a fully diluted basis.

Correction: A previous version of this article incorrectly stated that companies backed by VC firms went public at a value of more than $840 million. It has been updated to reflect the correct figure of $840 billion. 

Featured image by Mara Potter/PitchBook News

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