Corporate & Securities Law

Zero IPOs for Venture Backed Companies in 2Q 2008

By Ryan Roberts

Texas Startup Blog has a post about the lack of any IPO exits for venture backed companies this quarter. In fact, there weren’t any IPO exits this quarter which apparently hasn’t happened in 30 years. I decided to join the discussion and my comment trying to explain the lack of IPO exits is re-published below:

Like the article suggests, there are a couple different factors for the zilch IPO exits in 2Q 2008. 3 reasons for the lack of IPO exits (besides SOX stuff) are:

(1) Recent IPO exits have not done well - I think the statistic I remember from a couple months ago (NVCA presentation) was that only 28% of IPO exits (from 2007?) were trading above their IPO price.

(2) Cleantech/greentech takes a long time - Although keep in mind this, while a hot field, only comprises about 10% of funding. So there’s a bunch of capital going here the past 2 years (3.5B) that isn’t looking to exit anytime soon.

(3) Natural VC pattern - The number of first time fundings has increased every year since 2003, with 2007 being the best year post-bubble. Maybe the industry is just stuck between the not-a-lot-funded exit time/a-lot-funded early stage time?

It’s also worthwhile to look at the M&A exits, considering they have outnumbered IPO exits a little greater than 4:1 since 2004. While some of these exits were “fire sales” the quality of these exits is increasing every year. For first fundings from 1991 to 2000, M&A exists outpaced IPOs by a little more than 2:1. Currently, M&A exits are having a slow go of things. But there were still 56 M&A exits in Q1 2008.

Full post as published by The Startup Lawyer on June 29, 2008 (boomark / email).