Dow Jones VentureSource is out with its latest quarterly venture capital
report, and despite the usual boosterism (really, shouldn't a respected media organization at least feign a measure of objectivity or is that, like, unhip these days?) there's some interesting stuff buried beneath the happy talk.
Take this tidbit: In 2007, the median number of years for companies to reach liquidity reached a record 6.7 years, according to Dow Jones. In other words, investors are having to wait longer and longer to see a return on their money (and of course that stat says nothing about what proportion of those exits might count as successes). That timeline is at the upper margin of the three- to seven-year investment horizon historically favored by VCs. Meanwhile, the median period time for companies to go public rose to 7.1 years.
Citing data from Sand Hill Econometrics, Wharton School finance professor
Andrew Metrick wrote last year that five years after a company receives an initial investment, 13.2% have had an IPO, 19.8% have been bought, 6.3% are defunct, and 60.7% remain private. Within 10 years, those numbers are 23.2% for an IPO, 38% for an acquisition, 14.3% for out of business and 24.6% for still private.
Since VCs typically try to exit all their investments within 10 years,
stretching the time to liquidity would appear to present complications for general and
limited partners alike.
- Alain SherterSee Jan. 4 press release from Dow Jones via Yahoo!
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