Zero VC backed IPOs in Q1 of 2009!!!
Wow! there has been absolutely no Venture Capital backed IPOs in the first quarter of 2009 according to the National Venture Capital Association.
In the Pittsburgh Business Times NVCA President Mark Heesen has said that “We predicted that the venture-backed IPO market was going to get worse before it was going to get better,” and we were unfortunately correct,”. He continues “Today, our concerns are not limited to the zero IPO issues but have now expanded to the shrinking pipeline of companies in registration. Once we begin to see a recovery, there won’t be many companies prepared to take advantage of it, effectively extending the lackluster market until the pipeline rebuilds.”
Although this news is predictable, it highlights the truly dire state of the Venture Capital sector in the current economic downturn. The question now is if there are enough companies on the VC pipeline to generate healthy returns in future. In many ways VC style investing involves a numbers game. In other words, the few successful exits that occur along with giving a return, also pay for the losses in other companies that failed.
This news has serious implications for entrepreneurs and is definitely something that you should consider when putting together a financing plan. However, only a tiny percentage of start ups are suitable for VC funding anyway. The virtues of bootstrapping has never been so apparent.
It seems that the role of VCs must change drastically over the next few years. It remains to be seen what these changes will be.
