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And if you look at private equity, pull up that chart I had there. This is just stunning how big this industry is getting. You know, $5 trillion is what we're up to here. And it just keeps growing. I I think private equity is totally screwed. I I don't think Silver Lake or Infinity or this deal are screwed, but I think private equity in general is totally hosed. All right.
Well, it's gotten huge just since 2015 and tripling in size. So why is this I guess my question for the gentleman here and for the audience why is private equity becoming so large and what impact does that have on society if people can't put EA into their retirement account? They can't put Stripe into their retirement account. If we take all the great companies and we start to privatize them, SpaceX never goes public. What impact does that have on people's retirement accounts?
Okay, look I think I think the history of this is important. There was a long-standing belief that the best way to generate the best risk adjusted return. What does that mean? That means to manage through periods where the stock markets go down and to manage through periods of volatility. The best way to do that was to have what's called a 60/40 allocation. 60% to bonds and 40% to equities. Over many years, especially when we artificially suppressed rates at zero through Obama, a lot of people started to move their allocations away from 60/40 and they started to make more and more investments further out on the risk curve. The biggest beneficiaries of that were venture capital, private equity, and hedge funds.
The thing with private equity is that because rates were zero, they had an infinite amount of borrowing capacity, had very little downside to them, and so they were able to manufacture returns much faster than venture capital and hedge funds could. So, as a result, you had an initial group of people that were defining the asset class, making a ton of money, and then you had all these fast followers that said, "Well, if they're doing it, I can do it, too. So far, so good." But then always what happens is then you have this flood of lagards that just flood the zone. And it's these lagards that make it very difficult to generate returns because they start overpaying for assets. They start mismanaging and undermanaging the assets that they do own. And so where we are is that private equity has seen a very consistent way of returning money to help improve that 60/40 portfolio. as a result they got a lot of money but then that created a lot of competition and so that's why you see this hockey stick graph Jason and when you see that kind of graph it doesn't matter what asset class it is the returns go to zero and so we've seen this in venture capital we've seen this in hedge funds and we're now going to see this in private equity too much money going in to be clear what you're saying means you kind of exit it right there's there's no returns and so again I've said in any of these alternative asset classes, there's only one thing you should always ask if you had to have one critical question. What are your distributions? Don't show me your IRRa. What is your DPI? The distributions on your paidin capital. And if the answer is zero, then it is a very challenged asset class. And what I will tell you in private equity is that over the last four or five years, distributions have been few and far between.
So I think what's going to happen is that the money is going to come out of private equity and it's going to get concentrated into the few companies that know what they're doing of which Silverlake has generated over you know the last 15 20 years tens and tens of billions of dollars of distributions. They are just an exceptionally well-run organization. They've done these huge buyout deals successfully before. So, we need to go through that in PE. Where does the money go? The money's already leaked into private credit, which is the next big bubble that's building. It looks like this chart that you just showed, which is loaning businesses money.
You know, it's super interesting because you make such a good point. What we're seeing in private equity is these continuation funds. Now continuation funds are coming chimoth to venture. So I've been getting pitched on these continuation funds where like hey take all your assets sell it to a new group of people and then reset the clock and then there's never an exit. The good news is I will say the last year we've seen a lot more activity for shares of our companies that are still private. So the secondary market freeberg is coming back in a major way. But I do get worried about these continuation funds because now you're just moving an asset from one class to the other and we need to have a functioning IPO market. How functioning is the IPO market today? Would we say it's completely dysfunctional? How dysfunctional is the IPO market? Let me say it another way. And and how do we correct that? And this leads into your new spec.
Look, there are three ways to go public. There's the traditional way IPO, there's the direct listing, and then there's the reverse merger or the spa. Up until I floated IPO A in 2018, I think it was the first way was really the only way. I was involved in two direct listings, Slack and Coinbase. And in both of those, what I learned is that, you know, it has the same vagaries as the traditional IPO. So in the traditional IPO, you go to a bank, they underwrite you, they act as a gatekeeper, and they take six, seven, 8% fees as a result, and then they allocate what is essentially underpriced stock to their best customers. Then you see a one-day pop, maybe a two or three day pop. All of those customers tend to unload and then the stock tends to drift down. So the IPO is expensive and it typically is mispriced. The direct listing you have a different dynamic which is the first trade is always the highest trade and then it just goes straight down. That happened with Slack and it happened with Coinbase. So Spotify would be in that group as well. Yeah. Yeah. With Slack I remember like I I was like offside a billion dollars and I was like well I'm never letting this happen again. And so when I had the Coinbase thing, I sold it the first day. And I texted Brian. I said, "This is not a directional indication of your company. It's the dynamics of the direct listing because I learned it the hard way that the time to sell is on day one."
So where does the spack come in, you know, especially now in version two? Version two being the the thing that I have been tinkering and refining with and am trying to push in in this new version. I think that it's creating an incredibly competitive vehicle where you can have a ton of money go into these private companies, take them public at a very, very low cost of capital. And I think that that's should be very enticing.
So, you closed your financing. Can you just tell us what the capital raise was like as you went out and met with folks? What do you hear? Yes. You know, Nick, maybe you can find it. You know that image of the Raptor engines? Yes. super complex to being elegantly simple. Yeah. Nick, can you can you maybe just throw that up? What I would say is like Spack 1.0, of which I was, you know, right in the front of the parade, had a bunch of misfires and it was complicated, but it worked. There were some hot fires that worked, but then there were some clear misfires. And the whole point was to prove that you could create a competitive alternative to the IPO. The thing that I'm the most proud of quite honestly is for all intents and purposes I started a normalization of this vehicle that's now raised more than 1502 200 billion dollars for American companies. I am very proud of them. That's an important thing for the American capital markets. I think what we did in American exceptionalism is Raptor 2. It's not yet perfect, but I do think it tries to improve on the things that I noticed was not working in Raptor 1. And in that is a lot of the compensation and incentives. And so when I showed that to investors, they were quite excited. I think that they want a competitive IPO market that brings many many American businesses to the public market so that they can be owned by everybody, the transparency they like, and the fact that the incentives are such now where there's absolutely no compensation unless this thing really works. And historically they received warrants in the company typically with a strike price of 1150. So 15% above the issue price of the stock and founders shares that were basically and there was founder shares. But like did you have a reaction from them saying hey we want some warrants we we need a little extra kicker here like there's some sort of desire for that.
No in fact it was the opposite. I think that the institutional investors and you know my investors in this 98.7 of the capital was allocated to these guys are the best of the best. You you know who they are. So they're every single blue chip A+ institutional investor and what they wanted was great companies. They want great companies to be public and the reason is the thing that Freeberg I think you mentioned this before. When a good company gets public, the amount of money that they can raise in the publics and then the amount of growth that they have in the publics far outclasses what they'll ever do as a private company. And so they want the simplest and cheapest way of great businesses to get out.
Jamat, do you think that the transaction when you find a merger partner, the traditional spa has been announced as a merger concurrent with a pipe being done where new investors are underwriting the valuation of the deal and saying we like this company at this price cuz we are now going to write money in in the form of a pipe and historically the pipe was for common shares. So it kind of was like this is a good price and everyone felt good about it. Number one, do you anticipate that there'll still be a pipe being done in concurrent with the merger and this transaction? And then number two is do you think it'll look like a common pipe? Because after the spa frenzy died down, in order to get deals done, the pipe started to get done with convertible preferred securities. So they were senior to common and they almost were like dead. How do you think this is going to play out? because a clean deal has not happened in quite some time where a spa has announced a merger and simply raised money via common in the form of a pipe.
It's a great question. I think it comes down to the underlying asset, but there are some incredible companies that are private that if they go public will be able to demand common pipe capital. I think that the future maybe just prognosticating and guessing what does Raptor 3 look like in this back. I think the Raptor 3 will look like where somebody a sponsor like me rolls everything up into one thing so that it's already pre-wired from the beginning where I'll just speak to a billion, two billion, three billion, whatever it is, flexible capital that can come in as common so that it's a totally pre-baked IPO at a very fair price. I think that I think that that's what the Raptor 3 version of a spa will look like. So more capital and then they they put their full trust and faith in the sponsor to run the deal. Well, no then no meaning then there's no conversion risk that all the money comes over right from day comes over right and so then you have to fully commit.