It’s a bit hard to judge the state of the venture-backed exit market these days. And two reports out today seem to highlight that fact. First, Dow Jones Venture Source found that 20 venture-backed companies completed IPOs during the first quarter, nearly double the amount for the same period last year and marking the most active first quarter for IPOs since 2000.
There are also signs the momentum could continue with 50 companies currently in registration, and optimism over the recent passage of the JOBS Act which could help companies make the leap to the public markets.
However, the jump in IPOs was accompanied by a slow down in the M&A market, with a 32 percent decrease in deals and a 42 percent increase in capital raised. Dow Jones Venture Source tracked 94 M&A deals, which raised $18.1 billion.
One other interesting factoid: It’s taking longer for venture-backed companies to achieve an exit. The authors of the report found that it now takes a median $68 million and 7.7 years to reach an IPO. While that’s a 22 percent drop in capital, it also marks an increase from the 6.2 years it took at the same time last year.
On the M&A front, companies raised a median $13 million in venture capital, and they had to wait a median 4.9 years for the exit. That was up from 4.6 years last year.
Here’s how Jessica Canning, global research director for Dow Jones VentureSource, explained the recent drop in M&A activity?
“Greater stability in the public markets, more corporations opening venture units to work closely with startups without acquiring them, and a continued disconnect between entrepreneurs’ asking price and what corporations are willing to pay have contributed to a steady decline in M&A activity.”
In Seattle, both the IPO and M&A markets remain relatively anemic. The last tech company to complete an IPO was Zillow, which priced shares at $20 last July. Other than the big $500 million buyout of social gaming startup Double Down Interactive in January, there haven’t been many notable M&A.
The largest IPO of the quarter was ExactTarget, the Indianapolis marketing company which raised $161 million in late March.
In a separate report out today, Thomson Reuters and the National Venture Capital Association found that 19 venture-backed companies went public in the U.S. last quarter, marking what they called the strongest opening quarter in five years. The report tracked 86 venture-backed M&A deals, with 24 companies disclosing an aggregate deal value of $2.7 billion.
[IPO photo via Bigstock]
