Some serious cause for concern with respect to the US venture capital market. The second quarter of calendar year 2008 (April-June) has seen zero initial public offerings (IPO) by venture capital-backed companies — the first time since 1978. This comes via the National Venture Capital Association’s (NVCA) second quarter exit report for the US venture capital market. The association represents 480 US venture capital and private equity firms in the US (this does not include buyout firms). The report, compiled in collaboration with Thomson Reuters, also notes a slowdown in exits via mergers and acquisitions. See the complete report with five-year comparative data here.
Exits routes closing off is bad news for young companies looking to raise fresh money. In fact, exits slowing down follows a similar story with respect to fundraising in the first quarter of 2008. Fewer funds returned to raise fresh capital in the first quarter — 57 against 83 in Q1 2007 — and the amount raised , $6.26 billion, was marginally up from Q1 2007 ($6.21 billion). The good news in Q1 was that investments were up at $922 million against $861 million in Q1 2007. Fundraising and investment data for Q2 should be out in a few days on the NVCA website.
While the Indian venture capital market is not likely to be affected just yet, bad news in the US does eventually mean bad news here, specifically in the early-stage space. Think about all the venture capital funds actively investing here: 90 per cent are based in the US. Fortunately, most of the funds active here have already raised fresh corpuses and are well-capitalized for the next 12-18 months at least. So if you know a venture capitalist, even remotely, grab him/her now.
Comments