ARLINGTON, Va. – Just five startups backed by U.S. venture capital firms staged initial public offerings in the first three months of the year, as the stock market slump and continuing credit crunch discouraged investors, the National Venture Capital Association reported today.
Those five offerings – by one IT firm, computer security software developer ArcSight Inc., and four biotechnology or medical-device companies – raised a combined total of $272.8 million, according to Bloomberg News.
The just-ended period was the slowest since the second quarter of 2003, the NVCA said. By comparison, the trade group reported 31 V.C.-backed IPOs in the fourth quarter of 2007 and 19 in the 2007 first quarter.
“The market is locked up,” Mark Heesen, the NVCA’s president, told Bloomberg. “People are getting much more conservative,” and venture-backed businesses are seen as higher risk than more established companies, he said. Confirming that view, the Bloomberg IPO Index, which measures the performance of stocks in their first year post-IPO, has fallen 22 percent this year.
Tech companies such as software developer VMware Inc. and chip-maker Entropic Communications Inc. have been hurt by expectations that profits will lag forecasts, added Paul Bard, who follows IPOs for Renaissance Capital LLC in Greenwich, Conn. “When you have high-growth companies trading at 10 times forecast earnings, it’s a sign that no one believes the estimates. Investors tend to overshoot the cycle at both ends of the cycle, so recent IPOs have really taken it on the chin.”
But Dave Tabors, a partner at Waltham, Mass.-based Battery Ventures, noted that “some of the best deals [on technology stocks] came after the tech bubble burst,” in 2000. “The economy is a bigger factor in what we do than the IPO market,” he told Bloomberg News. “You can wait for the IPO market to reopen.”
The National Venture Capital Association is a trade group for the investment-capital industry. For additional information, including the full 24-page report, “Venture Impact: The Economic Importance of Venture Capital to the U.S. Economy,” fourth edition, visit www.NVCA.org.
