SAN FRANCISCO Jan 5 Venture capitalists, the
traditional engine of starting up firms in Silicon Valley, saw
their initial public offerings (IPOs) sputter to a halt in the
last three months of 2008, two surveys revealed on Monday.
Two polls, one by Dow Jones VentureSource and the other by
the National Venture Capital Association and Thomson Reuters,
found that the number of IPOs dropped by more than 90 percent
between 2007 and 2008, with none in the final quarter of last
IPOs are critical to the life-cycle of venture capital in
Silicon Valley and throughout the country.
Venture capitalists invest in start-ups and those that
flourish eventually go public, opening up money for new
innovative enterprises. Without IPOs, the money is locked up
and the innovation cycle stalls.
"New investments and fundraising will slow considerably in
2009 until the exit markets re-open and the pipeline is
cleared," said Mark Heesen, president of the venture capital
The two surveys used slightly different criteria to
classify companies as "venture backed," but came up with nearly
Dow Jones found the number of venture-backed IPOs dropped
from 76 to 7 between 2007 and 2008, while Thomson Reuters and
the venture capital association found the number dropped from
86 to six. Both surveys found that after the first quarter of
2008 only one venture-backed IPO took place.
"2008 proved to be a very rough year for the U.S. venture
capital industry," said Jessica Canning, Global Research
Director for Dow Jones VentureSource.
The story was less extreme for acquisitions, another avenue
for venture capitalists to cash out their investments and go on
to new ideas.
The ThomsonReuters survey found the number of mergers and
acquisitions of venture-backed firms had dropped below 300 for
the first time since 2003, but the decline was less than
one-third from the year before.
The Dow survey found that last year, venture-backed
companies generated $24.1 billion in liquidity in a combination
of IPOs and mergers acquisitions, down 58 percent from the
$57.6 billion in 2007.
(Reporting by David Lawsky; Editing by Bernard Orr)