This is pretty bad news from yesterday, although I guess it is no surprise. The National Venture Capital Association announced that no venture-backed companies went public in the last quarter. That’s the first time since 1978 that the U.S. markets have gone three full months without a venture-backed IPO. I say no surprise because we’re so obviously in a recession, hoping it doesn’t become a depression.
For the first time since 1978, there were no venture-backed Initial Public Offerings (IPOs) in the second quarter of 2008, according to the Exit Poll report by the National Venture Capital Association (NVCA) and Thomson Reuters. The absence of any offerings this quarter follows an exceptionally slow first quarter when only five venture-backed companies went public. This number is a fraction of the first half of 2007, when 43 companies went public. According to the NVCA, the situation is concerning enough to be characterized as a capital markets crisis for the startup community.
And it gets worse with the additional information:
During the week of June 23, the NVCA surveyed its membership on the current IPO drought. The 660-plus responses that were received from venture capitalists across the country reinforced the concerns of the association, specifically:
- 81 percent of venture capitalists do not see the IPO window opening in 2008.
- Two-thirds of venture capitalists believe that venture-backed companies are less likely to want to go public today than they were three years ago.
- The three largest factors to which venture capitalists attribute the current IPO
drought are:
- Skittish investors (77 percent)
- Credit crunch/mortgage crisis (64 percent)
- Sarbanes-Oxley regulation (57 percent)
- Only 8 percent of venture capitalists characterize the current IPO drought as “not critical” to the future health of the venture capital and entrepreneurial communities.
I’m not suggesting we jump to any conclusions with this–your startup will make it or not on other factors than this–but still, it’s good to stay informed. The economy is really suffering the effects of a combination of downward factors.
Sarbanes-Oxley, by the way, is a big deal for some companies … that’s the law that requires a collection of new hoops regarding documentation and securities and so forth, that companies have to jump through to go public.
This entry was posted on Thursday, July 3rd, 2008 at 4:44 am and is filed under Trends, venture capital. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.3 Responses to “IPO Drought for Venture Capital”
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July 4th, 2008 at 3:06 pm
[...] esta semana estuvo circulando una noticia en los blogs que augura una menor actividad en la industria del Venture Capital debido a su falta [...]
July 6th, 2008 at 11:18 am
I’m very interested in learning more about this topic…any suggestions?
Rgds,
Muvar
July 29th, 2008 at 3:09 pm
Tim, Hi…regarding a venture firm who is getting results in this weak IPO market check out Allegis Capital(www.allegiscapital.com) of Palo Alto, Ca. They invested in RIBBIT that just got bought today. They are making 3-4x returns on their funds and have had a total of $2.2 Billion in acquisitions since 2005. Check out the news on their site under press releases.