A new study by researchers at Santa Clara University's Center for Science, Technology, and Society sheds light on the current investment methods and profit expectations of 45 "impact investors," who invest in social-entrepreneur ventures around the world. The study aims to be a first step toward creating a more coordinated, venture-capital-style system for such social-venture startups.
View the full report. Coordinating Impact Capital, A New Approach to Investing in Small and Growing Businesses,
Background:
Here in the U.S., any first-year business student can tell you how the venture-capital process works for business startups: Seed or "angel" money is followed by early-stage VC investors who percolate successful ventures, followed by up-round VC investors and possibly "mezzanine" financiers. It's a very "vertical" process that's capped off, if one is lucky, by an initial public stock offering or an acquisition by a deep-pocketed company.
But that's not how it works for social-entrepreneur startups – those businesses around the world that are trying to solve stubborn social problems like food security or energy access and maybe one day make a profit as well.
There, the flow of investment capital is much more disconnected, inconsistent, and lacking in clear metrics to get the next phase. In other words, it's very "horizontal," notes John Kohler, a retired venture capitalist now working as a fellow with Santa Clara University's Center for Science, Technology, and Society. Kohler and a team headed by Jessica Sawhney, a recent Clinton Fellow, have now completed the first-of-its-kind report.
"Wouldn't it be great if, when a socially beneficial business received its first grant, it already knew where the next round would likely come from, and what benchmarks would be required to secure follow-on capital?" asked Kohler. "Currently, it's all over the map."
For the study, Kohler, Sawhney and a team of student researchers interviewed more than 45 funds, examining where they invested, size and type of investment vehicle used, time horizon preferred and outcomes that were expected for each of several classes of capital: grants, "soft" loans, debt, quasi-equity and equity investors.
Among the findings of the study:
• Almost all respondents stated they would like to participate in syndicated investments, either around a financing event or horizontally along a phased investment structure - but they needed to learn more about potential collaborators.
• All investors in this area are extending their time horizon for an exit or liquidity event, with 53 percent of respondents now expecting to wait between 5 - 10 years and another 13 percent indicating beyond 10 years.
• 58 percent of the investors are "single sourced" from a foundation, a family business or an NGO. Participation by corporations and financial industry firms is still relatively light.
• Funds that reported a global focus expected higher rates of return than regional or country-specific funds.
• Some impact investing funds are forming their own in-house pools of capital to invest in different phases of social investments - indicating a need for venture-capital-like "horizontal capital aggregation" for the whole community.
• Over 80 percent of investors reported that they do not use capacity development organizations to assist their portfolio companies. Yet the 50 percent who practiced monthly or greater contact with their investments expected a strikingly higher rate of return. This indicates benefits from "high touch" portfolio management, even if with a CDO.
• Despite evidence that urban-poor regions are better risks for investors than rural-poor, a surprisingly high percentage of investors were agnostic in measuring or choosing urban vs. rural areas for investment.
• Funds who invested for "impact" say they invest more in the entrepreneur and the idea, while financial investors focused on solid business models and execution by the social enterprise.
"This study gets us one step closer to identifying a business life-cycle for social ventures," said Kohler, "as well as to gather ready-made pools of capital into a syndication structure that accelerates social enterprise development more efficiently."
The authors plan to implement a pilot program in the near future to put into practice some of the suggestions from the study.
Monday, July 18, 2011
Thursday, July 14, 2011
Stereotypes can affect how women angels' invest
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Stereotypes about gender affect investment decision-making, even among successful women, researchers concluded in a new study on how gender affects investing strategies.
Examining angel funds, or groups of wealthy investors who pool resources to make investments into a diverse array of start-up businesses, researchers found that the proportion of women angel investors in a group is related to the number of investments made by the group. When women comprised more than 10 percent of the investment group, their presence became associated with increased investments.
John Becker-Blease, of Oregon State University, and Jeff Sohl, of the University of New Hampshire , co-authored the study, which is out in the July issue of the journal Entrepreneurship, Theory and Practice.
"It is well-documented that women are, on average, more cautious investors than men and so we expected to find that the higher the proportion of women in the angel groups, the less likely the angel group was to make an investment," said Becker-Blease, an assistant professor of finance in OSU's College of Business.
However, the study results surprised them.
"Contrary to our expectations, we found that only when women were in a very small minority was their presence associated with a decrease in investments," Becker-Blease said.
The researchers said this phenomenon could be related to something psychologists call "stereotype threat." According to this theory, when a stereotype exists about a person, that person will behave in a manner consistent with that stereotype when they are in a situation that highlights, or accentuates, this aspect of their status, whether that is gender, race or ethnicity.
Becker-Blease cited a past study that showed Asian female students performed relatively well on a math exam when their ethnic status was highlighted, and relatively poorly when their gender status was highlighted. Becker-Blease and Sohl believe something similar might be happening in angel groups.
"When there is only a handful of women participating in these groups, their status as women, who are less aggressive investors, induces greater reluctance to invest," Becker-Blease said, "but as the proportion of women increases, women investors are made less aware of their status, and invest with greater confidence."
According to Becker-Blease, these results are provocative and speak to the potential benefits of having more women investors participate in these important sources of funding for new businesses.
Stereotypes about gender affect investment decision-making, even among successful women, researchers concluded in a new study on how gender affects investing strategies.
Examining angel funds, or groups of wealthy investors who pool resources to make investments into a diverse array of start-up businesses, researchers found that the proportion of women angel investors in a group is related to the number of investments made by the group. When women comprised more than 10 percent of the investment group, their presence became associated with increased investments.
John Becker-Blease, of Oregon State University, and Jeff Sohl, of the University of New Hampshire , co-authored the study, which is out in the July issue of the journal Entrepreneurship, Theory and Practice.
"It is well-documented that women are, on average, more cautious investors than men and so we expected to find that the higher the proportion of women in the angel groups, the less likely the angel group was to make an investment," said Becker-Blease, an assistant professor of finance in OSU's College of Business.
However, the study results surprised them.
"Contrary to our expectations, we found that only when women were in a very small minority was their presence associated with a decrease in investments," Becker-Blease said.
The researchers said this phenomenon could be related to something psychologists call "stereotype threat." According to this theory, when a stereotype exists about a person, that person will behave in a manner consistent with that stereotype when they are in a situation that highlights, or accentuates, this aspect of their status, whether that is gender, race or ethnicity.
Becker-Blease cited a past study that showed Asian female students performed relatively well on a math exam when their ethnic status was highlighted, and relatively poorly when their gender status was highlighted. Becker-Blease and Sohl believe something similar might be happening in angel groups.
"When there is only a handful of women participating in these groups, their status as women, who are less aggressive investors, induces greater reluctance to invest," Becker-Blease said, "but as the proportion of women increases, women investors are made less aware of their status, and invest with greater confidence."
According to Becker-Blease, these results are provocative and speak to the potential benefits of having more women investors participate in these important sources of funding for new businesses.
Tuesday, July 12, 2011
M&As Lag as Public Markets Warm Up to Venture-Backed Companies
Dow Jones VentureSource: Consolidation Among Start-ups Accounted for 9% of M&As
IPOs in Double-Digits for Three Consecutive Quarters for First Time Since 2007
As the public markets warm up to venture-backed companies, corporate acquirers are pulling back. In the second quarter of 2011, 109 venture-backed companies achieved liquidity, netting $11.2 billion, according to Dow Jones VentureSource. That represents a 13% decrease in exits and 26% increase in capital raised from the second quarter of 2010.
"Deal-making is in a limbo– unstable global markets and sky rocketing IPO valuations are giving both acquirersand companies sufficient cause to wait,” said Jessica Canning, director of global research for Dow Jones VentureSource. “Everyone is watching the performance of recent IPOs to see how justifiable valuations really are.”
Consolidation Among Venture-Backed Companies Accounted for 9% of M&As
In the second quarter, acquirers bought 91 companies for $9.2 billion, a 13% drop in M&A activity from the same period last year when 105 acquisitions netted $7.2 billion. Information Technology (IT) was the most active area for acquisitions. Driven by interest in Software companies, the IT industry saw 38 M&As net $3 billion. Consumer Services, which includes consumer Web companies, was the second most active industry for acquisitions as 21 companies were bought for $2.1 billion.
While most M&As involved corporations buying venture-backed companies, eight start-ups sold themselves to other venture-backed companies, accounting for 9% of the quarter’s M&As.
"Consolidation is happening within the venture ecosystem as companies like Zynga, Jive Software and others pursue significant growth while still privately held,” said Ms. Canning.
Buyouts of venture-backed companies by private equity firms also tracked below the same period last year. Private equity firms bought four venture-backed companies for $283 million in the most recent quarter, down slightly from the same period last year when private equity firms bought five companies for $832 million.
The $64 million median amount paid for a venture-backed company in the most recent quarter was slightly less than the $66 million median in the same period last year.
To reach an M&A or buyout, companies raised a median of $19 million in venture financing, on par with the same period last year, and took a median of 5.6 years to build their company, slightly more time than the 5.5-year median in the second quarter of last year.
The largest M&A deal in the second quarter belonged to Berkeley, Calif.-based Plexxikon, a developer of small molecule pharmaceuticals, which was acquired by Daiichi Sankyo for $805 million.
IPOs in Double-Digits for Three Consecutive Quarters
Fourteen venture-backed companies went public in the second quarter, raising $1.7 billion, a slight drop in activity from the 15 IPOs that raised $859 million during the same period last year. With a total of 25 IPOs in the first two quarters, however, IPO activity is tracking ahead of the first six months of 2010, and for the first time since 2007 IPO activity has been in double-digits for three consecutive quarters.
"IPOs have been steady but the window has yet to fling wide open,” said Scott Austin, editor of Dow Jones VentureWire. “Despite talk of tech bubbles and excitement around offerings from Internet companies like LinkedIn and Pandora, macroeconomic issues could keep a tight hold on the IPO window as investors may be encouraged to stick with safer securities.”
Currently, 45 U.S. venture-backed companies are in IPO registration.
The median amount of venture capital raised prior to an IPO rose 55% to $109 million in the second quarter of 2011. The median amount of time it took a company to reach liquidity fell to 8.6 years from 9.3 years in same period last year.
For information on Dow Jones VentureSource’s research methodology, visit http://bit.ly/VSFAQs. For general information about Dow Jones Private Markets, visit http://www.dowjones.com/privatemarkets.
U.S. VC Fund-Raising Rose 19% in First Half
European Fund-Raising Dropped 45%
Early-Stage Funds Lagged as Late-Stage Commitments Picked Up
In the U.S., brand name venture firms raising anything other than an early-stage fund were the biggest draw for limited partners during the first half of 2011. Capital raised for venture funds rose 20% over the same period a year ago, hitting $8.1 billion, but the number of funds that held closings plummeted 38% to 50 funds, according to Dow Jones LP Source. Seven firms were responsible for raising $6.3 billion, almost 80% of the total capital raised during the first half. In the first half of 2010, 81 U.S. venture funds raised $6.8 billion.
The story for European venture funds was one of struggle as these funds recorded the worst first half since 2004. Fundraising for European venture funds declined 45% to $1.1 billion for 16 funds. During the same period last year, European venture funds raised $2 billion for 26 funds.
“This year and next will be make-or-break for scores of venture capital firms in search of new funds,” said Scott Austin, editor of Dow Jones VentureWire. “Limited partners have made it clear they're in no mood to back underperforming firms, so the competition for capital will be fierce.”
Across the U.S. private equity spectrum, which includes venture capital, funds raised $64.7 billion in the first half, a 35% jump over the same period last year. European private equity funds collected $24 billion, a 48% increase over the year-ago period.See detailed PE breakout.
U.S Funds: Early-Stage Funds Lagged as Late-Stage Commitments Picked Up
In the U.S., excitement about highly valued Internet companies seems to have eclipsed early-stage fund-raising. Twenty-eight early-stage funds raised $1.1 billion in the first half, a 48% drop in fund closings and capital committed. If early-stage funds continue at this pace, they will collect less than half of the $5.2 billion raised in 2010.
Late-stage funds had their strongest first half since 2007. In the first half of 2011, seven late-stage funds raised $2.9 billion, well above the same period last year when two funds raised $150 million.
Despite a 40% drop in fund closings and 8% drop in capital raised, multi-stage funds were still the biggest capital collector in the first half, raising $4.1 billion for 15 funds. However, this category’s strength came from the first quarter’s fund closings as just two firms raised $99 million during the second quarter.
Europe: LPs Focus on Early-Stage Funds
Limited partners for European funds favored early-stage vehicles as 11 funds collected $952 million during the first half. This was a 30% drop in capital collected from the same period a year earlier. Multi-stage funds fell out of favor with LPs as five funds raised $150 million, a 70% drop in capital raised from the first half of 2010.
Dow Jones LP Source classifies multiple fund closings – first, interim, final – separately, based on the year of the closing, to provide an accurate view of the annual fund-raising environment. For more information about Dow Jones LP Source or Private Equity Analyst, visit http://privateequity.dowjones.com.
Private Equity Fund-Raising Continues Slow Climb in the U.S. and Europe
Dow Jones LP Source: U.S. Private Equity Funds Raised $64.7 Billion, European Funds Raised $24 Billion During First Half; Buyout and Venture Funds Helped Fuel the Recovery
Limited partners gradually picked up their commitment pace to private equity during the first half of 2011. According to figures from Dow Jones LP Source, U.S. private equity funds raised $64.7 billion for 201 funds in the first half of the year, a 35% increase in capital committed over the $47.8 billion raised by 225 funds during the first half of 2010. Buyout and venture capital funds drove the rebound in the U.S. and helped put the industry on pace to exceed last year’s fund-raising total.
European private equity funds collected $24 billion for 62 funds during the first half, up 48% from the $16.2 billion raised for 76 funds a year earlier. While fund-raising figures are still well below levels seen before the economic downturn, the first half of 2011 was the strongest first half for fund-raising since 2008.
“After three consecutive years of declining fund-raising, the industry has finally begun to dig its way out of the crater created by the U.S. financial crisis in late 2008,” said Laura Kreutzer, managing editor of Dow Jones Private Equity Analyst. “There’s an abundance of fund managers with strong track records that are back in marketing mode and investors appear to have regained some level of confidence in the asset class.”
Dow Jones LP Source classifies multiple fund closings (first, interim, final) separately, based on the year of the closing, to provide an accurate view of the annual fund-raising environment.
Buyout Funds Spring Back to Life
Thanks partly to a greater number of firms looking to raise funds of more than $1 billion, capital flowed into Buyout funds. U.S. Buyout funds raised $46.1 billion across 94 funds during the first half of 2011. This was almost double the capital raised for Buyout funds during the same period last year, one of the worst fund-raising years in recent history.
“In 2009 and 2010, the multi-billion fund was like the California Condor in the 1980s,” said Kreutzer. “You knew it once existed, but who ever really saw one? This year, while they aren’t exactly plentiful, the multi-billion funds have finally come off of the endangered species list.”
Within the Buyouts sector, fund-raising volumes were boosted by Industry-focused funds, which saw fund-raising almost double to $11.9 billion, and Restructuring and Distressed Debt vehicles, which saw fund-raising jump 50% to $12.6 billion.
In Europe, Buyout funds, which accounted for 84% of the region’s private equity industry, secured $20.1 billion for 36 funds during the first half, up from $9.3 billion raised for 35 funds a year earlier. As in the U.S., funds targeting more than $1 billion captured the bulk of the money.
Mezzanine and Secondary Fortunes Decline
U.S. funds focused on Mezzanine strategies saw a decline during the first half of 2011, as they attracted $2 billion for 13 funds, a 56% decrease in commitments from the same period in 2010. Meanwhile, the amount raised by Secondary funds dropped 62% to $3.2 billion for 11 funds.
“Mezzanine and secondary funds typically enjoy more popularity during market downturns,” said Kreutzer. “Many of the experienced managers in each of these sectors raised capital in 2009 or 2010, so it’s hardly a surprise that their numbers have dropped off this year.”
Two European Mezzanine funds raised $885 million in the first half of 2011, down 8% from the same period a year earlier. Secondary funds focused on Europe ran counter to the trend in the U.S. as four funds raised $1.7 billion, a 66% increase in capital committed over the first half of 2010.
U.S. Venture Fund-Raising Shines for Some, but European Funds Still Struggle
In the U.S., brand name venture firms raising anything other than an early-stage fund were the biggest draw for limited partners during the first half of 2011. Capital raised for venture funds rose 19% over the same period a year ago, hitting $8.1 billion, but the number of funds that held closings plummeted 38% to 50 funds. Seven firms were responsible for raising $6.3 billion of the $8.1 billion collected during the first half.
The story for European venture funds was one of struggle as these funds recorded the worst first half since 2004. Fund-raising for European venture funds declined 45% to $1.1 billion for 16 funds.
Monday, July 11, 2011
VENTURE CAPITAL INDUSTRY RAISES $2.7 BILLION IN Q2 2011
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Number of Funds Raising Dollars at 16 Year Low
Thirty-seven US venture capital funds raised $2.7 billion in the second quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 28 percent increase by dollar commitments, but a 23 percent decline by number of funds compared to the second quarter of 2010, which saw 48 funds raise $2.1 billion during the period. US venture capital fundraising during the first half of 2011 totaled $10.2 billion from 76 funds, a 67% increase by dollars compared to the first half of 2010 but a 15% decrease by number of funds, marking the lowest number of funds garnering commitments since the first half of 1995.
Fundraising by Venture Funds
Year Funds Venture Capital ($M)
2007 233 30,739.7
2008 212 25,814.7
2009 153 16,191.9
2010 162 13,346.3
2011 76 10,242.2
Quarter
1Q'09 58 4,945.9
2Q'09 39 4,844.2
3Q'09 34 2,332.0
4Q'09 47 4,069.8
1Q'10 45 4,033.8
2Q'10 48 2,098.4
3Q'10 53 3,593.8
4Q'10 45 3,620.3
1Q'11 42 7,551.4
2Q'11 37 2,690.7
Source: Thomson Reuters & National Venture Capital Association
“The fact that the number of firms raising money successfully remains at such low levels confirms an ongoing contraction of the venture capital industry, which will serve well those funds that can obtain commitments – but that group is becoming more and more narrow,” said Mark Heesen, president of the NVCA. "While a smaller venture industry will intuitively produce higher returns, it is critical that the mix of funds remain geographically diverse and cover a broad base of industries if we expect to contribute to economic growth and innovation at the levels we have historically. For that reason, we would like to see more funds raise money in the second half of the year."
There were 24 follow-on funds and 13 new funds raised in the second quarter of 2011, a ratio of 1.8-to-1 of follow-on to new funds. The largest new fund reporting commitments during the second quarter of 2011 was New York-based Level Equity Growth Partners I, L.P., which raised $120 million in its inaugural fund. A “new” fund is defined as the first fund at a newly established firm, although the general partner of that firm may have previous experience investing in venture capital.
VC Funds: New vs. Follow-On
New Follow Total
2007 64 169 233
2008 58 154 212
2009 39 114 153
2010 49 113 162
2011 22 54 76
1Q'09 10 48 58
2Q'09 12 27 39
3Q'09 12 22 34
4Q'09 12 35 47
1Q'10 14 31 45
2Q'10 16 32 48
3Q'10 19 34 53
4Q'10 13 32 45
1Q'11 10 32 42
2Q'11 13 24 37
Source: Thomson Reuters & National Venture Capital Association
Second quarter 2011 venture capital fundraising was bolstered by two fund commitments from Palo Alto-based Accel Partners, which accounted for 50 percent of this quarter’s fundraising total. Accel Growth Fund II, L.P. raised $875 million during the quarter, while Accel XI, L.P. raised $475 million.
Methodology
The Thomson Reuters/National Venture Capital Association sample includes U.S.-based venture capital funds. Classifications are based on the headquarter location of the fund, not the location of venture capital firm. The sample excludes fund of funds.
Effective November 1, 2010, Thomson Reuters venture capital fund data has been updated in order to provide more consistent and relevant categories for searching and reporting. As a result of these changes, there may be shifts in historical fundraising statistics as a result of movements of funds between primary market & nation samples and/or between fund stage categories.
About Thomson Reuters
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 55,000 people and operates in over 100 countries. For more information, go to www.thomsonreuters.com.
About National Venture Capital Association
Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2009 Global Insight study, venture-backed companies accounted for 12.1 million jobs and $2.9 trillion in revenue in the United States in 2008. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its 400 plus members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.
Number of Funds Raising Dollars at 16 Year Low
Thirty-seven US venture capital funds raised $2.7 billion in the second quarter of 2011, according to Thomson Reuters and the National Venture Capital Association (NVCA). This level marks a 28 percent increase by dollar commitments, but a 23 percent decline by number of funds compared to the second quarter of 2010, which saw 48 funds raise $2.1 billion during the period. US venture capital fundraising during the first half of 2011 totaled $10.2 billion from 76 funds, a 67% increase by dollars compared to the first half of 2010 but a 15% decrease by number of funds, marking the lowest number of funds garnering commitments since the first half of 1995.
Fundraising by Venture Funds
Year Funds Venture Capital ($M)
2007 233 30,739.7
2008 212 25,814.7
2009 153 16,191.9
2010 162 13,346.3
2011 76 10,242.2
Quarter
1Q'09 58 4,945.9
2Q'09 39 4,844.2
3Q'09 34 2,332.0
4Q'09 47 4,069.8
1Q'10 45 4,033.8
2Q'10 48 2,098.4
3Q'10 53 3,593.8
4Q'10 45 3,620.3
1Q'11 42 7,551.4
2Q'11 37 2,690.7
Source: Thomson Reuters & National Venture Capital Association
“The fact that the number of firms raising money successfully remains at such low levels confirms an ongoing contraction of the venture capital industry, which will serve well those funds that can obtain commitments – but that group is becoming more and more narrow,” said Mark Heesen, president of the NVCA. "While a smaller venture industry will intuitively produce higher returns, it is critical that the mix of funds remain geographically diverse and cover a broad base of industries if we expect to contribute to economic growth and innovation at the levels we have historically. For that reason, we would like to see more funds raise money in the second half of the year."
There were 24 follow-on funds and 13 new funds raised in the second quarter of 2011, a ratio of 1.8-to-1 of follow-on to new funds. The largest new fund reporting commitments during the second quarter of 2011 was New York-based Level Equity Growth Partners I, L.P., which raised $120 million in its inaugural fund. A “new” fund is defined as the first fund at a newly established firm, although the general partner of that firm may have previous experience investing in venture capital.
VC Funds: New vs. Follow-On
New Follow Total
2007 64 169 233
2008 58 154 212
2009 39 114 153
2010 49 113 162
2011 22 54 76
1Q'09 10 48 58
2Q'09 12 27 39
3Q'09 12 22 34
4Q'09 12 35 47
1Q'10 14 31 45
2Q'10 16 32 48
3Q'10 19 34 53
4Q'10 13 32 45
1Q'11 10 32 42
2Q'11 13 24 37
Source: Thomson Reuters & National Venture Capital Association
Second quarter 2011 venture capital fundraising was bolstered by two fund commitments from Palo Alto-based Accel Partners, which accounted for 50 percent of this quarter’s fundraising total. Accel Growth Fund II, L.P. raised $875 million during the quarter, while Accel XI, L.P. raised $475 million.
Methodology
The Thomson Reuters/National Venture Capital Association sample includes U.S.-based venture capital funds. Classifications are based on the headquarter location of the fund, not the location of venture capital firm. The sample excludes fund of funds.
Effective November 1, 2010, Thomson Reuters venture capital fund data has been updated in order to provide more consistent and relevant categories for searching and reporting. As a result of these changes, there may be shifts in historical fundraising statistics as a result of movements of funds between primary market & nation samples and/or between fund stage categories.
About Thomson Reuters
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. We combine industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 55,000 people and operates in over 100 countries. For more information, go to www.thomsonreuters.com.
About National Venture Capital Association
Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. According to a 2009 Global Insight study, venture-backed companies accounted for 12.1 million jobs and $2.9 trillion in revenue in the United States in 2008. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its 400 plus members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.
Friday, July 1, 2011
VENTURED-BACKED IPO MARKET ACTIVITY CONTINUES TO IMPROVE IN Q2 2011
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Driven by internet specific companies, venture-backed IPO exit activity showed marked volume increases over the second quarter of last year as the number of M&A exits returned to 2009 levels with disclosed dollar value remaining in line with recent quarterly volume. Twenty-two venture-backed IPOs valued at $5.5 billion came to market in the second quarter of 2011, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). By dollars this quarter marked the strongest three-month period for venture-backed IPOs since the third quarter of 2000. For the second quarter 79 venture-backed M&A deals were reported, 36 which had an aggregate deal value of $5.4 billion.
"When assessing the health of the venture-backed exit markets, it is important to differentiate between hype and reality,” said Mark Heesen, president of the NVCA. “You need to look beyond the handful of high profile companies that have gone public or registered this quarter and examine what is happening with the broader market. If you do so, what you will see is an IPO market that is gradually improving from one of the most challenging exit environments ever faced by the venture industry and an acquisitions market that remains strong and is realigning itself with a new reality. We are not experiencing an IPO bubble and these numbers certainly do not suggest that one is forming. In fact, we would like to see more public offerings and continued improvements in post IPO performance over the rest of 2011 in order to remain on the road towards recovery.”
IPO Activity Overview
There were 22 venture-backed IPOs valued at $5.5 billion in the second quarter of 2011, more than triple the dollar value seen during the second quarter of 2010 and a 29 percent increase by number of offerings compared to last year at this time. Fourteen of this quarter’s offerings were from companies based in the United States while companies in France, Canada and Russia added one IPO each. Five of this quarter’s IPOs were from companies based in China.
Fourteen of the 21 IPO exits for the quarter came from the Information Technology sector accounting for a total of $3.9 billion. Eleven of the companies to go public in the IT sector were Internet Specific raising $3.5 billion, the largest quarterly total for this sub-sector on record. By number of deals this quarter was the strongest three-month period for internet specific new listings since the third quarter of 2000 when 15 companies also went public.
In the largest IPO of the quarter Russian internet provider Yandex (YNDX) raised $1.3 billion on NASDAQ on May 24th. The offering was the second largest IPO in the Internet Specific sector on record behind Google’s $1.7 billion IPO in 2004. .
Beijing-based Renren Inc (RENN), a social networking Internet platform in China, raised $743 million on the New York Stock Exchange NASDAQ on May 4th ranking as third biggest venture-backed internet specific IPO on record.
For the second quarter of 2011, 10 companies listed on the New York Stock Exchange (NYSE) and 12 listed on the NASDAQ stock exchange.
Of the 22 IPOs in the second quarter, 15 are trading at or above their offering prices as of June 30, 2011. Forty-six U.S. venture-backed companies are currently filed for an initial public offering with the SEC.
Mergers and Acquisitions Overview
As of June 30, 2011, 79 venture-backed M&A deals were reported for the second quarter, 36 which had an aggregate deal value of $5.4 billion. The average disclosed deal value was $150.3 million, up 24 percent from Q1 2011. By total disclosed deal value second quarter volume marks a 56 percent increase from the second quarter of 2010.
The information technology sector led the venture-backed M&A landscape with 56 deals and a disclosed total dollar value of $2.7 billion. Within this sector, Internet specific and Computer software and services accounted for the bulk of the targets with 21 and 20 transactions, respectively, across these sector subsets. For the first half of 2011, venture-backed M&A activity is up 31 percent by disclosed value and down eight percent by number of deals, compared to the first half of 2010.
In the biggest venture-backed M&A deal of the quarter, Japan’s Daiichi Sankyo acquired Plexxikon Inc, a Berkeley-based biopharmaceutical company, for $805 million.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 38 percent of the total during second quarter 2011. Venture-backed M&A deals returning less than the amount invested accounted for 26 percent of the quarterly total.
“While we are anticipating increases in the number of venture-backed exits in the second half of the year, we can not stress the importance of stability right now,” Heesen said. “The on-going debt limit debate combined with continuing uncertainty regarding governments and economies in many regions of the world could impact the capital markets and corporate spending on acquisitions in the second half of the year. We hope that will not be the case, but need to be prepared for it nonetheless."
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Driven by internet specific companies, venture-backed IPO exit activity showed marked volume increases over the second quarter of last year as the number of M&A exits returned to 2009 levels with disclosed dollar value remaining in line with recent quarterly volume. Twenty-two venture-backed IPOs valued at $5.5 billion came to market in the second quarter of 2011, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). By dollars this quarter marked the strongest three-month period for venture-backed IPOs since the third quarter of 2000. For the second quarter 79 venture-backed M&A deals were reported, 36 which had an aggregate deal value of $5.4 billion.
"When assessing the health of the venture-backed exit markets, it is important to differentiate between hype and reality,” said Mark Heesen, president of the NVCA. “You need to look beyond the handful of high profile companies that have gone public or registered this quarter and examine what is happening with the broader market. If you do so, what you will see is an IPO market that is gradually improving from one of the most challenging exit environments ever faced by the venture industry and an acquisitions market that remains strong and is realigning itself with a new reality. We are not experiencing an IPO bubble and these numbers certainly do not suggest that one is forming. In fact, we would like to see more public offerings and continued improvements in post IPO performance over the rest of 2011 in order to remain on the road towards recovery.”
IPO Activity Overview
There were 22 venture-backed IPOs valued at $5.5 billion in the second quarter of 2011, more than triple the dollar value seen during the second quarter of 2010 and a 29 percent increase by number of offerings compared to last year at this time. Fourteen of this quarter’s offerings were from companies based in the United States while companies in France, Canada and Russia added one IPO each. Five of this quarter’s IPOs were from companies based in China.
Fourteen of the 21 IPO exits for the quarter came from the Information Technology sector accounting for a total of $3.9 billion. Eleven of the companies to go public in the IT sector were Internet Specific raising $3.5 billion, the largest quarterly total for this sub-sector on record. By number of deals this quarter was the strongest three-month period for internet specific new listings since the third quarter of 2000 when 15 companies also went public.
In the largest IPO of the quarter Russian internet provider Yandex (YNDX) raised $1.3 billion on NASDAQ on May 24th. The offering was the second largest IPO in the Internet Specific sector on record behind Google’s $1.7 billion IPO in 2004. .
Beijing-based Renren Inc (RENN), a social networking Internet platform in China, raised $743 million on the New York Stock Exchange NASDAQ on May 4th ranking as third biggest venture-backed internet specific IPO on record.
For the second quarter of 2011, 10 companies listed on the New York Stock Exchange (NYSE) and 12 listed on the NASDAQ stock exchange.
Of the 22 IPOs in the second quarter, 15 are trading at or above their offering prices as of June 30, 2011. Forty-six U.S. venture-backed companies are currently filed for an initial public offering with the SEC.
Mergers and Acquisitions Overview
As of June 30, 2011, 79 venture-backed M&A deals were reported for the second quarter, 36 which had an aggregate deal value of $5.4 billion. The average disclosed deal value was $150.3 million, up 24 percent from Q1 2011. By total disclosed deal value second quarter volume marks a 56 percent increase from the second quarter of 2010.
The information technology sector led the venture-backed M&A landscape with 56 deals and a disclosed total dollar value of $2.7 billion. Within this sector, Internet specific and Computer software and services accounted for the bulk of the targets with 21 and 20 transactions, respectively, across these sector subsets. For the first half of 2011, venture-backed M&A activity is up 31 percent by disclosed value and down eight percent by number of deals, compared to the first half of 2010.
In the biggest venture-backed M&A deal of the quarter, Japan’s Daiichi Sankyo acquired Plexxikon Inc, a Berkeley-based biopharmaceutical company, for $805 million.
Deals bringing in the top returns, those with disclosed values greater than four times the venture investment, accounted for 38 percent of the total during second quarter 2011. Venture-backed M&A deals returning less than the amount invested accounted for 26 percent of the quarterly total.
“While we are anticipating increases in the number of venture-backed exits in the second half of the year, we can not stress the importance of stability right now,” Heesen said. “The on-going debt limit debate combined with continuing uncertainty regarding governments and economies in many regions of the world could impact the capital markets and corporate spending on acquisitions in the second half of the year. We hope that will not be the case, but need to be prepared for it nonetheless."
Complete report
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