Venture Investors Leap Through I.P.O. Window

NYT DealBook, January 2, 2008:
Giving money to start-ups is easy. Getting it back, with profits: That’s the tough part of being a venture capitalist.
In their quest for profitable exits, venture capitalists have been having a lot of success with initial public offerings lately, according to year-end data compiled by Thomson Financial and the National Venture Capital Association. They found that there were 31 initial public offerings by venture-backed companies in the fourth quarter of 2007, with a combined value of $3 billion. That is the highest level in a single quarter since 2000, reflecting how investors in the last year or so have been relatively receptive to new stocks, and especially tech-related offerings.
(Those statistics include all companies trading on a United States stock exchange with at least one U.S.-based venture investor.)
The pace could be slowing, however. At the end of the third quarter, there were 72 venture-backed I.P.O.’s in the pipeline, based on registrations with the Securities and Exchange Commission. That number dropped to 60 by the end of 2007.
The largest venture-backed I.P.O. of the quarter came not from a tech start-up but a pharmacy chain: China Nepstar Chain Drugstore, a Chinese company, raised $350 million, after fees, in a November offering on the New York Stock Exchange. Its only venture investor was a unit of Goldman Sachs.
Mergers, the other exit path for venture investors, have been a dead end by comparison.
Wednesday’s report found that there were 45 mergers and acquisitions involving venture-backed companies in the fourth quarter. That was the lowest quarterly figure in nearly 10 years.
That means that, for many Silicon Valley investors, the notion of cashing out a la YouTube — which sold to Google for $1.65 billion in stock — remains a pipe dream for the moment.
The biggest merger of a venture-backed company in the quarter involved Oxygen Media, the cable network whose early investors include Oprah Winfrey. It was sold to NBC Universal, a unit of General Electric, for about $925 million.
Go to Press Release from Thomson Financial and the N.V.C.A. »