It’s a bleak time on Wall Street, at least if you’re trying to take your company public.
Just six venture-backed companies — all of them in the life sciences and medical device arena — completed initial public offerings during the first quarter, according to the Exit Poll Report by Thomson Reuters and the National Venture Capital Association.
That was the slowest quarter for venture-backed IPO activity since the third quarter of 2011, and it represented a 65 percent drop in deals compared to the first quarter of 2015. Things are especially rough in Washington state, where there has not been a tech-oriented IPO for more than 16 months when Juno Therapeutics and Alder Biopharmaceuticals went public.
This is tough news for venture capitalists, who typically cash out when companies go public or get acquired. According to the report, there were 79 mergers and acquisitions during the first quarter, down from 97 in the first quarter of 2015.
There’s definitely a cooling effect in the air when it comes to exits. Here’s the analysis from Bobby Franklin of the NVCA:
A strong IPO market requires a stable market for public stocks. Due to a sustained period of turbulence in the public markets at the start of the year combined with non-traditional investors making direct investments into later-stage startups, venture-backed IPO activity in the first quarter was nearly non-existent.
Despite the successes of a handful of venture-backed biotechnology companies making IPOs, the IPO window for venture-backed companies from other sectors has been completely shut. While this may cause some to panic, venture capital is a long-game business and seasoned venture investors have lived through these slowdowns before. As they wait for the IPO window to open again, venture investors are keeping calm and carrying on, focusing their attention on growing and maintaining their portfolios of the next generation of great American companies.
The six venture-backed IPOs raised $574.5 million in the first quarter, and all of them were in the life sciences arena. Five of the six IPOs were from U.S.-based companies, with the largest U.S. offering of the quarter coming from Cambridge, Massachusetts-based Editas Medicine, which raised $108.6 million on the NASDAQ stock exchange on February 2.
Beijing, China-based BeiGene Ltd raised $182.2 million, and it too began trading on the NASDAQ on February 2nd.