Exits pursued by a bear
The holy grail of building up a company and taking it public or selling it, known as ‘exits’ in Silicon Valley, has become more elusive, the NYT has reported.
During Q1 there were only five venture capital-backed NPOs, down from 31 in Q4, 2007, a rate not seen since the dot-bombs rained down in 2001. Registrations to go public have almost halved. M&A was also down, with only 56 acquisitions compared to 83 in the fourth quarter of last year.
‘It’s not good news, and we are not trying to sugarcoat it at all,’ said Mark G. Heesen, President of the National Venture Capital Association. ‘For Silicon Valley, it means fewer start-ups funded, fewer entrepreneurs funded, fewer employers that you hope will be the next major employer.’
The NVCA found only 28 percent of venture-backed companies that went public in the last twelve months are quoted above the offering price. This compares to about 50 percent in an average year, 70 in a good one.
The Nasdaq composite is down 11.4 percent this year, with blue chip Google down 31 percent and Apple 21 percent.
Companies with overseas employees are taking a hit from the dollar’s decline, with costs rising 10-20 percent. Conversely, those with strong overseas sales are inclined to smile.
To put it into perspective, the Center for the Continuing Study of the California Economy predicts 10,000 new jobs in the area this year, down from 17,700 last year, and 25,000 in 2006.
The NYT detects ‘the cusp of a mood shift,’ and quoted Hans Swildens, founder of Industry Ventures, in support. ‘Less cash coming into the Valley means less cash to purchase homes and go out to nice dinners,’ said Swildens. We feel your pain, Hans.
