Fifty-seven percent. That’s how much overall venture-backed liquidity decreased in the second quarter of 2009 compared to that of last year: from $6.48 billion to $2.8 billion, if you want the hard numbers. Looking at the chart, I’d say the drop compared to the second quarter of 2007 ($14.6 billion) is even more telling. It’s the bad news from this just-released Dow Jones VentureSource report, with the only positive nugget the fact that three VC-backed companies have been able to complete IPOs (raising a total of $232 million), ending a nine-month drought.
Just half an hour ago, we reported separately that the National Venture Capital Association actually counted five IPOs during the quarter in which a total of $721 million was raised (including DigitalGlobe-$279, SolarWinds-$152 million and OpenTable-$60 million). Also, while the NVCA pegged the number of venture-backed acquisitions at 59 in the second quarter, generating $2.6 billion, the Dow Jones VentureSource report says $2.8 billion was reached through M&As of 67 portfolio companies instead.
Either way, it’s looking very bleak out there, as venture capitalists are not only struggling to take their portfolio companies public but also to sell them. According to the Dow Jones report, M&As were down 60% from the $6.48 billion raised via 89 M&As in the same quarter in 2008. This represents the lowest quarterly M&A deal total since 1999. Furthermore, the median amount paid for a VC-backed company in the second quarter of 2009 was just shy of $22 million, a 46% drop from the nearly $41 million median paid during the same period in 2008.
Jessica Canning, Director of Global Research for Dow Jones VentureSource, commented that the market appears to be correcting the “possibly inflated figures” posted in 2007, but sees the IPO window finally opening up again.
I second Erick’s comment that it’s a bit too early to call it a come-back, but I’m sure a lot of people are happy to finally see at least some IPO activity again, even if it pales in comparison to what we’ve seen from 2004 to 2007.
The NVCA has not released any numbers with regards to IPOs and M&A’s yet this morning. I am not certain where you received your information but it is incorrect with regards to what we will release in the next few hours.
Actually the numbers were correct with the sole exception that in your final release you counted 59 M&A transactions instead of 58. We’ve updated both posts to reflect that change.
This is called the monkey see, monkey do effect!
Good. Excellent. Venture Capital firms do very little, take too much, and are filled with decision makers who are rich kid sons of their more successful fathers.
So please die off, Valley VC. No one wants you.
No one cares.
Is this related, in any way, to business dealings on the internet – where R&D costs are much cheaper? It may not be a bad thing. I need to know more. I’d be very interested in seeing where the dwindling money is going. From what and to what? Where can we find that out?
Edwin:
Open up a newspaper. No one has any money to invest. The VC firms can’t raise capital. No one has capital to invest.
You read the newspapers, right? You are aware of what’s going on in the world, aren’t you?
Please tell me you are…
I’m going to forget (or dealy?) about my 10,000,000 EUR need for my first round.
And with higher taxes on venture capital and with new bankruptcy laws, expect that number to go lower, lower, and lower.
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Robin,
Is that a reference to The Cable Guy, where the Red Knight is going down, down, down?
If it is, I applaud you for the reference.
@ Robin
The title of the first graph should not be “total amount raised”. It should rather be “total value of exits” or another expression for exit.
The amount raised by a venture capital firm describes funding from limited partners (venture capital fund investors).