Not that everyone didn't see it coming, but guess what? The third quarter stank for venture capitalists seeking to reap the rewards of their investments. In fact, it was the worst period in five years for VC exits. So says new data from Dow Jones VentureSource.

According to the stats, VC-backed companies generated $4.57 billion in liquidity for their backers via initial public offerings or M&A. That's a 66% drop from the year-earlier period. There were 66 acquisitions worth $4.4 billion; the lone IPO was the $153 million debut of Rackspace Hosting Inc.

Dow Jones VentureSource global research director Jessica Canning noted that 2008 is on track to be the worst year for IPOs and money raised from them.

"Without viable liquidity options, venture capitalists aren't going to invest in innovative technologies and companies, and we may see a pull-back that will have long-term effects on both the public and private markets going forward," she added in a statement.

That might be a bit dour, as VCs base their decisions on five- to seven-year investment horizons. That said, the study did find that the median time until a VC-backed company gets bought has stretched to 6.1 years, while the price fetched has nearly been halved compared to last year. Ouch. -- Olaf de Senerpont Domis

See Aug. 8 post on Rackspace's IPO from Tech Confidential