Guest commentary: IPO outlook for Central Coast depends on AI, national trends
By Scott Olmsted and Gabe Simon
Despite successful IPOs from the likes of Ibotta, Reddit and OneStream, 2024 didn’t provide the influx of capital-raising opportunities that many late-stage tech startups and venture capitalists have been waiting for.
Since highs last seen in 2021 — when 90 tech companies went public — the national IPO market has been muted, with just five tech IPOs between January and September 2024.
In 2023, the Central Coast mirrored the national trend, with only four companies based in the tri-county region reporting a venture capital raise, and only two of those being valued at $10 million or more.
As a result, limited partners have not been able to realize their investments and redeploy capital.
This shifting investment landscape has VCs and tech leaders feeling stuck in a holding pattern.
With rare exceptions such as Central Coast-headquartered startups Snappt and Theta Lake, tech leaders are hesitant to access the public markets because valuations are down significantly from 2021 funding rounds, making late-stage fundraising more challenging.
The 2025 outlook for the IPO market once again looks promising but only time will tell if it comes to fruition.
Of course, there’s always an exception.
And in the case of a slowed IPO market, a select slice of tech companies — AI-related companies — are far outperforming others.
While not every tech startup has AI software or infrastructure as their core offering, most “innovation industries” such as aerospace, precision manufacturing, clean tech and other technology fields, which have a nearly $8 billion impact on the local San Luis Obispo and Santa Barabra county’s economies, can benefit from using AI to revise their playbook and become more attractive to investors.
While overall tech startup investment has slowed in the Central Coast and across the country, the AI sector burns bright, and the Central Coast remains a thriving tech hub, home to leading companies and a ripe entrepreneurial ecosystem.
This presents an opportunity for companies that strategically leverage AI, not just as a buzzword but as a tool for genuine growth and differentiation.
Imagine a future where AI-powered insights unlock unprecedented efficiency, customer engagement and a paradigm shift in value creation.
This isn’t just about weathering the current storm of reduced access to capital; it’s about emerging stronger, ready to lead the next wave of tech innovation.
Here’s how to navigate the AI frontier and unlock its potential:
DATA IS THE FOUNDATION
AI is powerful, but it’s not magic. It thrives on high-quality, interconnected data. Before diving into AI initiatives, companies must assess their data health. Is it structured in a way that AI can understand? Does it go beyond raw numbers to capture context and meaning—like customer sentiment alongside sales figures? Rethinking data infrastructure is often the crucial first step.
AMPLIFY YOUR STRENGTHS
The allure of AI can tempt companies into pursuing radical reinvention. However, a more effective strategy is to leverage AI to enhance existing strengths and address core customer needs. Why do customers choose your company? How can AI supercharge your value proposition? Consider Reddit’s strategic approach: They didn’t overhaul their platform before their 2024 IPO. Instead, they showcased the value of their vast online communities as fertile ground for AI development, leading to a remarkable first-day stock surge of 48%.
USE AI AS CUSTOMER-CENTRIC MULTIPLIER
Companies with a deep understanding of their customer base are primed for AI success. By integrating AI into the verycore of their product or service—the reason customers choose them—they can create a decisive competitive advantage based on delivering tangible customer value.
FROM SMALL GAINS TO BIG GROWTH
This practical, customer-centric approach has the potential to help companies in the Central Coast elsewhere generate immediate growth while laying the foundation for future reinvention. By leveraging AI to optimize operations, deepen customer relationships, and redefine industry paradigms, late-state tech startups can not only survive but thrive in a dynamic market. The future belongs to those who embrace AI not as a destination but as a continuous journey of innovation and growth.
Scott Olmsted is the Los Angeles-based National Technology Industry and Green Economy Executive leading a team of bankers across the country at Bank of America. Gabe Simon is the Los Angeles SVP Technology Banking.
