U.S. VC Industry Sees No IPOs in Q1 as Liquidity Plummets 65% to $3.2 Billion, Lowest Since 2003
01 April 2009 - 2:15PM
PR Newswire (US)
Dow Jones VentureSource: M&As Offer Little Recourse as Industry
Suffers Record 8-Month IPO Drought; Medtronic Buys Account for 30%
of All Liquidity SAN FRANCISCO, April 1 /PRNewswire/ -- Having not
seen a venture-backed company complete an initial public offering
(IPO) in nearly eight months, the U.S. venture capital industry is
suffering through its worst liquidity drought on record, according
to new statistics published by Dow Jones VentureSource (follow the
story at http://www.twitter.com/djventurewire). During the first
quarter of 2009, venture capitalists managed to generate just $3.2
billion in liquidity through mergers or acquisitions (M&As) of
68 portfolio companies, a 65% drop from the $9.1 billion in
liquidity generated in the first quarter of 2008 and the lowest
quarterly total since 2003. "The most disturbing part about these
new liquidity figures is that we've already reached the lows seen
after the dot-com bust and we may not be at the bottom yet," said
Jessica Canning, Global Research Director for VentureSource. "The
IPO market is totally closed and there's just no clear indication
right now that it will revive any time in the next quarter or two,
even with 43 companies currently in registration. It's a tough time
to be a venture capitalist - and likely even tougher to be an
investor in a venture fund." M&As: Only Up From Here? According
to VentureSource, liquidity generated through the sale (M&As)
of venture-backed companies fell 64% from $8.8 billion in the first
quarter of 2008 to $3.2 billion in the first quarter of this year.
The 68 M&As in the quarter are a far cry from the 104 completed
in the first quarter last year and the lowest number of M&A
transactions in a quarter since 1999. "Emerging companies in the
information technology (IT) space are really suffering. In the
first quarter of 2009, only 43 of these companies were sold - the
fewest we've seen in 10 years," said Ms. Canning. "This is due to
the fact that many public technology companies are focused on
conserving capital and the few that are buying venture-backed
companies are doing so for lower prices." The data showed that the
overall median amount paid for a VC-backed company in the first
quarter of the year was just shy of $22.1 million--a 63% drop from
the nearly $60 million median paid during the same period in 2008.
The largest M&A transaction in the first quarter was
Medtronic's $700 million acquisition of Irvine, Calif.-based
medical device-maker CoreValve. In fact, Medtronic was responsible
for providing 30% of all venture liquidity in the quarter, as it
also bought Ablation Frontiers, a Carlsbad, Calif.-based medical
device company, for $225 million. Companies Need Less Money, Time
to Reach Liquidity According to VentureSource, venture-backed
companies took less time and money to achieve liquidity in the
first quarter of 2009. Prior to achieving a merger or acquisition,
the companies raised a median of $15.5 million in venture capital -
33% less than the median $23 million raised by companies that
exited during the same period last year. In addition, the median
amount of time it took to reach liquidity was 4.7 years in the
first quarter of 2009, nearly a third less time than the 6.8-year
median seen in the first quarter of 2008. For more information,
journalists can contact Adam Wade at 415-439-6666 or , or follow
the story at http://www.twitter.com/djventurewire. For general
information about VentureSource, visit
http://venturecapital.dowjones.com/. The investment figures
included in this release are based on aggregate findings of Dow
Jones VentureSource's proprietary U.S. research. This data was
collected by surveying professional venture capital firms, through
in-depth interviews with company CEOs and CFOs, and from secondary
sources. These venture capital statistics are for equity
investments into early-stage, innovative companies and do not
include companies receiving funding solely from corporate,
individual, and/or government investors. No statement herein is to
be construed as a recommendation to buy or sell securities or to
provide investment advice. Copyright (C) 2009, Dow Jones
VentureSource About Dow Jones Dow Jones & Company
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stations in the U.S. DATASOURCE: Dow Jones VentureSource CONTACT:
Adam Wade of Dow Jones Financial Information Services,
+1-415-439-6666, Web Site: http://www.twitter.com/djventurewire
http://www.dowjones.com/ http://venturecapital.dowjones.com/
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