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Venture-Backed Exits Rebound in 2010

January 05, 2011

After two years of stagnancy, venture-backed company exits improved dramatically in 2010, according to the National Venture Capital Association (NVCA). The increase was driven by a record-breaking market for acquisitions and the best quarter for initial public offerings (IPOs) in ten years. NVCA attributes the uptick in IPOs to a surge in Chinese venture-backed companies going public on U.S. exchanges. A recent NVCA/Dow Jones VentureSource survey finds that most venture capitalists (VCs) and venture-backed CEOs expect exits to continue their upward swing and that venture investments will grow in the coming year.

Last year, there were 72 venture-backed IPOs valued at $7.02 billion, 32 of which went public during the fourth quarter. Only 12 venture-backed companies went public in 2009, and only six did so in 2008. While 2010 was on track to surpass the previous year's numbers in the third quarter, an influx of 17 China-based companies spurred the fourth quarter market to the highest number of venture-backed IPOs since the fourth quarter of 2000. The substantial jump in IPOs put the U.S. on track to return to its pre-crisis levels (86 venture-backed companies valued at $10.33 billion went public in 2007), if U.S. firms can approximate the pace of Chinese public offerings.

The upswing in mergers and acquisitions (M&As) last year was even more remarkable, as the market reached an all-time high for M&A activity. After a disastrous 2009, 420 venture-backed M&A were reported last year, the highest number since records began in 1984. The growth was led by the information technology sector with 72 deals with a disclosed value of $2.8 billion.

Read the NVCA report: http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=683&Itemid=93.

NVCA and Dow Jones VentureSource's annual survey of venture capitalists and venture-backed CEOs find more encouraging news for the venture capital market. VCs have regained some of the confidence missing over the past two years, with 51 percent predicting an increase in venture investment in 2011. Twenty-four percent predict that investment levels will fall and 24 percent predict it to stay the same. The highest levels of investment are expected in information technology, particularly the Consumer Internet and Digital Media, Cloud Computing, and Mobile/Telecom sectors. Two-thirds of VCs expect more IPOs next year, and 81 percent expect more M&As.

Venture-backed CEOs were just as optimistic, with 82 percent planning to increase their company's headcount next year. Sixty-four percent of CEOs and sixty-three percent of VCs expect the overall U.S. economy to improve.

Read the NVCA survey: http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=682

capital, venture capital