Bad markets= No IPOs
Posted on September 30th, 2008 – 3:58 PMBy Thomas Lee
More bad financial news: there were no venture capital-backed IPOs in the second quarter, the worst quarterly performance since 1978, according to a recent report by PricewaterhouseCoopers.
“There is little indication that the market will recover anytime before the second quarter in 2009,” said Tracy Lefteroff, global managing partner of the Venture Capital and Private Equity Practice at PricewaterhouseCoopers.
With no exits in sight, VCs will be forced to spend more money and time on their investments, the report says. As a result, VCs will aim for higher priced IPOs in order to get a decent return on their investment. Companies will also need to gain at least a $500 million market value in order to attract coverage from analysts.
The report also predicts VCs will avoid investing in startups that require lots of capital and time to mature, bad news for medical device and drug companies.
“Venture capitalists who have to maintain portfolio companies for longer than expected will be stretched for dollars to make new investments, but, more importantly, they will be stretched for time,” said Mark Heesen, president of the National Venture Capital Association. “There are only so many boards that a VC can join and be effective. Without exits, venture capitalists will be hard pressed to commit additional investments.”
