Getting Ready for an IPO Window: Venture Capital in the Northeast

9/22/11

An overriding story of the past several years has undoubtedly been the global economic volatility. Conditions in the stock markets have been unpredictable and therefore many venture capital firms have felt the need to reserve more capital for existing investments, postpone new investments and, in some cases, postpone raising new funds. While a number of firms adapted to the challenges by supporting many of their companies with additional investment rounds, the challenge to raise new funds, even smaller funds, still appears to be present.

According to a recent global study Deloitte LLP did with the National Venture Capital Association about the state of the global initial public offering market, VCs appear to be very concerned about the lackluster IPO market and the potential for IPOs in the future. Many VCs believe that without the higher returns generated by IPOs, the exit opportunities offered by M&A alone are not compelling enough to draw limited partner interest over the long term.

Other trends that stood out from this survey include:

• VCs feel the pinch from low IPO activity: More than 80 percent of venture capitalists surveyed felt the current IPO level of activity was too low to support a healthy VC industry. Many believe the higher returns generated by IPOs are important to providing superior returns to LPs and growth capital necessary to developing portfolio companies.

• U.S. exchanges are viewed as most promising for venture-backed IPOs: 87 percent of global respondents selected the NASDAQ as one of the three most promising stock exchanges for venture-backed IPOs. The New York Stock Exchange was the next most promising with 39 percent.

• Lack of key drivers a cause of light activity: 83 percent of all respondents indicated there needed to be a stronger investor appetite for equity in public companies in order to create … Next Page »

Mark Davis is managing partner for Deloitte & Touche LLP in Jericho, NY and leads Deloitte & Touche LLP’s tri-state venture-backed growth practice. Steve Ingram is a partner and the New England Tech-Venture Center venture capital practice leader at Deloitte & Touche LLP in Waltham, MA. Follow @

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