Trouble on Sand Hill Road: VC-Backed Liquidity Drops 66% to $4.6 Billion in 3Q08, Lowest Since 2003 |
Dow Jones VentureSource Finds Economic Woes Reeking Havoc on IPOs, M&As
Industry on Pace for Worst IPO Year Ever
M&As Also Behind As Prices Fall
SAN FRANCISCO, Sept. 30 /PRNewswire/ -- The troubles on Wall Street
aren't just being felt on Main Street, they're also taking a toll on the
residents of Sand Hill Road and other venture capitalist enclaves. In the
third quarter of 2008, venture-backed companies generated just $4.57
billion in liquidity through initial public offerings (IPOs) and mergers
and acquisitions (M&As), down 66% from the $13.4 billion generated in the
third quarter of 2007, according to Dow Jones VentureSource
(http://www.venturecapital.dowjones.com). While there were 66 M&As completed in
the quarter, generating $4.4 billion in liquidity, only one venture-backed
company-Rackspace Hosting of San Antonio- completed an IPO, worth $159
million.
"The U.S. venture capital industry is facing the worst IPO market we've
ever seen," said Jessica Canning, Global Research Director for Dow Jones
VentureSource. "With just $551 million raised via seven IPOs so far this
year, 2008 is on pace to be the worst year on record in terms of both
number of IPOs and liquidity generated via IPO."
"The ripple effects of the public market crisis are already being felt
in the private markets," added Ms. Canning. "Without viable liquidity
options, venture capitalists aren't going to invest in innovative
technologies and companies, and we may see a pull-back that will have
long-term effects on both the public and private markets going forward."
M&As - More Troubling News
For the second quarter in a row, fewer than 70 U.S. venture-backed
companies that completed M&As, according to the data. The third quarter's
66 M&A transactions raised just $4.4 billion, down 65% from the $12.7
billion generated in 116 M&As during the same period last year and the
lowest amount raised since the fourth quarter of 2003. With only 247 M&As
completed thus far, 2008 is on pace to also see the lowest number of M&As
completed in at least a decade.
Ms. Canning said: "While the median time to liquidity continues to
increase-now at a 6.1 years for an M&A-the median amount paid for a
venture- backed company is pulling back also, down to $56 million," Ms.
Canning said. "In the third quarter, we saw venture-backed companies being
sold for 46% less than they were at this time during last year's liquidity
spike."
Information technology (IT) companies accounted for the bulk of capital
raised via M&A in the third quarter with 48 transactions generating more
than $2.9 billion in liquidity, 60% below the nearly $7.3 billion raised in
74 M&A transactions during the same quarter last year. The largest M&A deal
of the third quarter was the SBA Communications' $430 million acquisition
of Westborough, MA-based wireless infrastructure provider Optasite, Inc.
According to the data, 11 venture-backed health care companies
completed M&As in the quarter, raising $798 million, 68% less than the $2.5
billion raised via 15 M&As for the segment in the third quarter of 2008.
Elsewhere, the Consumer Services industry saw three M&A transactions
close, generating $110 million in liquidity, while the Business and
Financial Services Industry recorded three M&As, worth $160 million. The
lone M&A for the Industrial Goods & Materials industry-the acquisition of
Insitu Group by Boeing-generated $400 million.
To request a demonstration of the Dow Jones VentureSource database, log
on to http://www.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.
About Dow Jones
Dow Jones & Company (http://www.dowjones.com) is a subsidiary of News
Corporation (NYSE: NWS, NWS.A; ASX: NWS, NWSLV; http://www.newscorp.com). Dow
Jones is a leading provider of global business news and information
services. Its Consumer Media Group publishes The Wall Street Journal,
Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise
Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client
Solutions, Dow Jones Indexes and Dow Jones Financial Information Services.
Its Local Media Group operates community-based information franchises. Dow
Jones owns 50% of SmartMoney and 33% of Stoxx Ltd. and provides news
content radio stations in the U.S.
SOURCE Dow Jones & Company
back to topRelated links:
CONTACT:
Adam Wade, Dow Jones Financial Information
Services, +1-415-439-6666, adam.wade@dowjones.com
