SAN FRANCISCO, Jan. 2 /PRNewswire/ -- With no initial public offerings
(IPOs) and just $3.9 billion generated via mergers and acquisitions (M&As) of
65 venture-backed companies in the fourth quarter, 2008 proved to be the worst
year in terms of liquidity for U.S. venture capitalists since the
post-tech-bust doldrums of 2003, according to official statistics released
today by Dow Jones VentureSource (http://www.venturecapital.dowjones.com).
Overall, U.S. venture-backed companies generated $24.1 billion in liquidity
through IPOs and M&As in 2008, down 58% from the $57.6 billion in liquidity
produced in 2007. Just seven companies completed public offerings in 2008,
raising $551 million -- a far cry from the $6.8 billion generated through the
public listings of 76 companies in 2007 and the lowest totals recorded since
VentureSource began tracking the industry in 1992.
"2008 proved to be a very rough year for the U.S. venture capital
industry," said Jessica Canning, Global Research Director for VentureSource.
"With virtually no IPOs and corporations only making choice acquisitions, the
liquidity markets have essentially been cut off for venture investors.
Additionally, the ever-increasing amount of time it takes for a company to go
public or get acquired is stretching out the lifecycle of venture funds and
therefore returns to venture firms and their limited partners."
M&As: Downward Trajectory
After peaking in 2007 at a seven-year high of $50.9 billion, liquidity
generated through the sale (M&As) of venture-backed companies fell 54% to
$23.5 billion in 2008. According to the statistics, only 325 venture-backed
companies merged or were acquired in 2008, the lowest number of M&A tractions
since 1999, and down 29% from the 457 companies sold in 2007. In particular,
the 65 venture-backed companies sold for an aggregate $3.9 billion in the
fourth quarter of 2008 marked the lowest quarterly transaction number since
1999 and far below the 123 companies sold for $16.4 billion in the fourth
quarter of 2007.
"Overall, the median amount paid for a VC-backed company in 2008 was
roughly $45 million -- half of the median $90 million paid in 2007," said Ms.
Canning. "Since the fourth quarter of 2007, we've seen the median acquisition
price drop steadily from quarter to quarter in lock-step with the decline of
M&A transactions."
According to VentureSource, the largest M&A for the fourth quarter was
eBay's $945 million acquisition of Timonium, Maryland-based transaction
service provider Bill Me Later. The largest M&A deal of 2008 was Dell's $1.4
billion acquisition data storage company Equalogic -- a deal that was
announced in the fourth quarter of 2007 but closed in January 2008.
The IPO Market: The Door is Closed
The data shows that only seven venture-backed companies completed initial
public offerings in 2008, generating $551 million in liquidity. There were no
public offerings completed by venture-backed companies in the second and
fourth quarters of the year.
Ms. Canning added: "There are currently 18 venture-backed companies in IPO
registration but nearly all of these companies filed before the stock market
fell in October and will likely remain in a holding pattern or withdraw their
offerings until the market recovers."
The largest IPO of the year belonged to RiskMetrics Group of New York
City, a provider of financial and wealth management software, which raised
$174 million in its January IPO.
More Money, More Time Go Into Reaching Liquidity
Dow Jones VentureSource also found that it's taking more time and money
for venture-financed companies to achieve liquidity. In 2008, companies
raised a record median of $22.6 million in venture capital and took a record
median of 6.5 years to reach liquidity via M&A.
In terms of IPO companies, the median amount of venture capital raised
prior to IPO fell 19% from $69 million in 2007 to $56 million in 2008. The
median amount of time it took a company to reach liquidity hit a record 8.3
years, more than a year longer than reported in 2007 when it was 7.2 years.
For more information or to request a demonstration of Dow Jones
VentureSource, visit http://venturecapital.dowjones.com or call 866-291-1800.
The investment figures included in this release are based on aggregate
findings of Dow Jones VentureSource's proprietary U.S. research. This data
was collected by surveying professional venture capital firms, through
in-depth interviews with company CEOs and CFOs, and from secondary sources.
These venture capital statistics are for equity investments into early-stage,
innovative companies and do not include companies receiving funding solely
from corporate, individual, and/or government investors. No statement herein
is to be construed as a recommendation to buy or sell securities or to provide
investment advice.
Copyright (C) 2009, Dow Jones VentureSource
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