Fast-growing startups in search of capital and liquidity have traditionally sought to exit the private capital market through M&A or IPO. Until recently, antitrust enforcers rarely challenged startup acquisitions. But under the Biden administration, enforcers worried about the growing dominance of Big Tech sued to block more startup deals. Since antitrust restricts M&A but not IPOs, one might expect that greater antitrust enforcement would cause startups to substitute one kind of exit for another, leading to more IPOs. That did not happen. While M&A and IPOs both provide liquidity, they are not perfect substitutes. We model heterogeneity in M&A and IPO pricing to explore how increased antitrust enforcement impacts venture capital. Economies of scale and scope, synergies, regulatory costs, market power, and market cyclicality can cause IPO valuations to fall significantly below M&A prices. And heightened antitrust scrutiny can reduce the value of an IPO by undermining one of its main advantages: access to publicly traded equity that can be used as currency for future acquisitions. In this Article, we show how startups have responded to the antitrust crackdown not by choosing a different exit but by choosing no exit. Startups are easing liquidity pressure by letting employees cash out their shares in tender offers. Venture capitalists are extending their exit horizons by forming continuation funds. Would-be acquirers have developed new structures to evade antitrust law, such as the centaur a private company funded by public company cash flows and the reverse acquihire a mass employee exodus from a startup to a public tech company, coupled with a cloaked payoff to the startup's investors. We explain the implications of these changes for competition policy, capital formation, and the continuing erosion of transparency into socially important businesses.
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