It’s official: 2015 was a peak for private equity. After five years of growth in venture funding, it’s starting to look like the pause we all felt at the end of 2015 was, in fact, a change in direction. Like any roller coaster ride, the view from the top of the first hill is impressive, but the next thing you do is hold your breath.

As 2015 unfolded, so did a growing imbalance between the public and the private markets. With interest running high in the “alternative asset space” and cheap debt for LBOs, the costs of going public made the process not particularly worthwhile. In contrast, a glut of capital in late-stage funding rounds led to an increasing preference for private capital markets. Year-end 2015 topped a five years of funding growth at $74.2 billion across 4,890 deals, reflecting a 26% year-over-year increase in funding, and a 10% decrease in deals. The third quarter alone saw IPO activity fall 34% year-over-year, while the median capital raised in private fundraising rounds hit a staggering $92 million.

In our blog post back in November, we discussed the potential implications of the rising valuations and their impact on the public market – most notably, the high potential for a rapid devaluation of late finance rounds. Several high profile, third quarter IPOs fell short of the private valuations, leading to a correction in the fourth quarter of 2015, as IPOs fell 22% from the third quarter. The number of IPOs that placed below range, on the other hand, increased from 27% in the third quarter of 2015 to 60% in the fourth quarter.   According to Pitchbook, investor wariness has led to an increase in risk premiums in both the public and the private market, leaving late-stage startups hard pressed to find the cash injections necessary to achieve growth. Compensatory provisions similar to those found in the Square pre-IPO rounds are expected to become more frequent as companies in need of funds may be forced into softer debuts, with deleterious effects on investor returns.

The IPO market is also seeing increasing competition from M&A activity, as M&A deals continue to inflate in value while IPO pricings have consistently fallen short of expectations. Through November 2015, there were over 10,000 announced M&A deals in the United States with a total deal value over $2 trillion, 679 of which included corporate acquisitions of VC-backed companies, for a total of $68.2 billion.   Companies contemplating going public have taken to a two-pronged approach, in which they shop for potential buyers while simultaneously preparing for an IPO. With investors wary of inflated IPO values, M&A has become a more promising exit strategy for venture companies, and is a trend expected to continue into 2016.

The question, of course, is what’s next? It definitely looks like we’ve reached the top on this roller coaster ride. The difference, however, is that with a roller coaster you know what’s coming. VC could be in for a more thrilling adventure.