Venture investors sitting on large hordes of previously committed capital are somewhat immune to most of the bad news coming down from the crisis in the credit markets, and some may even feel a tad smug about additional opportunities volatile markets might create.
But on the other end of the business, the gloom that has been apparent for months was expressed starkly in Thomson Financial and the National Venture Capital Association's
exit poll for the first quarter of 2008. With just five deals, the volume of IPOs of venture-backed companies hit a low not seen since 2003, when only two were recorded. The five consummated deals totaled just $282.7 million in proceeds, a huge drop from $2.2 billion for the 18 IPOs floated in the first quarter of 2007, with the average offering size plunging from $122 million to $57 million.
Trade sales didn't fare much better. M&A markets resulted in only 56 deals in the first quarter, totaling $2.5 billion in proceeds, compared with 82 deals in the first quarter of 2007 amounting to $4.5 billion. Average deal size held up a little better at $124.6 million, compared with last year's figure of $156.6 million.
In a statement accompanying the results, normally bullish NVCA president Mark Heesen (pictured) didn't make much of an effort to put a good spin on the numbers. "U.S. economic uncertainty clearly impacted the venture-backed IPO market in the first quarter," he said. "It was not a great start to the year by any measure, and we will need to see a significant increase in volume in the remaining three quarters to salvage the rest of the year." Oddly, however, given the shrinking deal size, he posited that the "quality of the exits-- both IPO's and acquisitions--appears to be holding up, which should translate into some much needed confidence for venture-backed companies looking to exit in 2008."
For venture firms focused on Web 2.0 and other information technology deals, the results were even worse than they look at first glance, as four of the five IPO exits were life science deals. Security management software maker
Arcsight Inc. managed to brave the public markets, raising $61.8 million thanks to a seemingly ironclad roster of investors, including Institutional Venture Partners, Kleiner Perkins Caufield & Byers, Integral Capital Partners, In-Q-Tel Inc. and Samsung Venture Investment Corp.
Ominously, there were no public exits for overseas companies on U.S. exchanges for the first time in eight years, though one bit of anecdotal good news came for the Sunshine State, as Florida claimed two IPOs in the quarter for the first time since 2005. But even if there were a window for public sales, it's not likely that there would be a clamor to open it, as statistics tracking last year's IPOs show that fewer than one-third of venture-backed companies that went public during the previous 12-month period are above water.
--Clifford Carlsen
See April 1 press release from the National Venture Capital AssociationSee Feb. 15 story from Tech ConfidentialFor more see
San Jose Mercury News and
Xconomy.com
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