Just one VC-backed business went public over the past two quarters, as investors wait for the market to rebound.
The ailing venture-backed IPO market continued to tank for the duration of the third quarter, according to a report released this week by Thomson Reuters and the National Venture Capital Association.
Just a single VC-backed company issued an IPO in the July-September quarter, among only 58 merger and acquisition deals, the report showed. There were no IPOs over the second quarter, a 30-year low for the industry.
Market watchers speak the financial meltdown is casting a shadow over venture-backed companies.
“The disaster in the financial markets has additional exacerbated an already troubling situation in that most venture-backed companies are postponing or abandoning an IPO exit for the foreseeable future,” Mark Heesen, president of the NVCA, said in a statement. Still, he added most companies are “very strong” along with will likely continue in the VC portfolio in anticipation of the market rebounds.
Shaky market conditions moreover mean longer waits for VCs accustomed to quick returns. That’s resulting in less funding to finance the latest companies, making VCs ever more leery of risky investments, said Tracy Lefteroff, global managing partner of Venture Capital Practice at PricewaterhouseCoopers.
“It would in numerous situations force venture capitalists to cut back on what they might have invested in and continue to sustain their older companies,” he said.
Thirty-eight VC-backed companies are presently filed for IPOs with the SEC, down from 42 in the second quarter, the report showed. Twenty-eight have withdrawn as of registration this year. Furthermore, the lower M&A transaction volume reveals the skittishness of large corporations as they exercise more caution in their strategies to acquire VC-backed companies.
Regardless of the decline in exits, Lefteroff said he remains optimistic.
“Even though the market’s been shot, the realism is that a lot of these venture backed companies are beginning to construct real businesses,” he said. “I think you’ll see a very mature group of companies that contact the IPO window as soon as it opens again.”
