StartupCentral

A bunch of independent research reports are out on worldwide venture capital and private equity activity during the April to June quarter of 2009. Overall, fundraising and investment levels continue to be depressed, compared to the same period in 2008. But, the second quarter numbers mark some improvement over the January to March 2009 quarter.

• The National Venture Capital Association (NVCA) reports that venture capital exits in the US market have shown “mild improvement”. Initial public offerings (IPO), the preferred exit route for venture capital investors, have made a small comeback. Five venture-backed companies hit the capital markets to raise $720.7 million in the April to June 2009 quarter. This is a significant improvement over the full year 2008, which saw only six IPOs worth $470.2 million. More details in the NVCA release here.
• Preqin reports $76 billion in global private equity (includes venture capital) fundraising during the April to June 2009 quarter. This is a 28% growth over the $60 billion raised in the January to March 2009 quarter. However, compared to the $213 billion raised in the April to June 2008 quarter, it is still a steep climb up to normal levels. Full details in the Preqin release here.
• PitchBook reports global private equity investments (does not include venture capital) at $11.11 billion in the April to June 2009 quarter, down 18.5% from $13.64 billion in the January to March 2009 quarter. The research firm concludes that investors are still waiting for the investment environment to improve. It estimates that investors are sitting on $400 billion in available funds. Details in the PitchBook release here.

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 (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, especially 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 capital and are well-capitalized for the next 12-18 months at least.