Thomson Financial and National Venture Capital Association (NVCA) released a Exit Poll survey July 5, indicating venture-backed IPOs inched forward in the second quarter of 2006 and acquisitions remained stable. That said, the NVCA warned that it remains wary about the health of the U.S. public markets.
According to the report 19 venture-backed companies raised $2.0 billion through initial public offerings on U.S. exchanges in the second quarter. This volume represents a 90 percent increase from the first quarter of 2006 when ten venture-backed companies went public, according to the report. It is also near double the volume from a year ago when ten companies went public during the same period. In addition, there were 86 venture-backed acquisitions with a disclosed value of $3.2 billion reported in the second quarter.
"The growth in IPO volume is encouraging, but we certainly are not out of the woods yet," said Mark Heesen, president of the NVCA. "We will need to see these levels continue to increase throughout the rest of the year to characterize the U.S. public markets as available to venture-backed companies. These companies now have a multitude of exit and liquidity options — acquisitions, foreign exchanges, and buyout rounds. A US IPO is still not a viable option for many of these emerging enterprises. We not only need to see more companies going public, but more companies going public successfully if we expect others to follow suit."
Highlights from the Exit Poll Survey:
Technology Companies Raise $1.4 Billion
The technology sector had eight companies raise a total of $1.4 billion in the second quarter. The largest IPO of the second quarter was the $531 million offering from Vonage Holdings Corporation. The New Jersey-based provider of digital telephone service via the Internet priced 31.3 million shares at $17, the largest public offering of a venture-backed company since October 2004. Vonage was backed by New Enterprise Associates, Bain Capital, 3i, Meritech Capital Partners, and Institutional Venture Partners.
Life Sciences Led IPO Activity by Pricing
The Life Sciences sector led the IPO activity by pricing nine venture-backed IPOs raising a total of $452.2 million in the second quarter. The largest IPO in the Life Sciences sector was the $106.5 million offering from Northstar Neurosciences, Inc., a Seattle, Washington-based medical device company backed by Mayfield Fund, Domain Associates, Canaan Partners, and AEA Investors.
Offering Sizes & Post-Offering Values Increase
Along with the large jump in IPO volume, the venture-backed companies that went public during the second quarter were also the beneficiaries of increased offering sizes and post-offering values, both at their highest levels since the fourth quarter of 2004. For the rolling 12 month period ending June 30, 2006, 52% of the companies that went public are currently trading above their offering price.
41 Companies in Registration
In addition to the IPOs completed this quarter, there are currently 41 venture-backed companies "in registration" with the United States Securities and Exchange Commission. These companies have filed with the SEC in 2005 or 2006 and are now preparing for their initial public offerings. This compares favorably to the 24 companies in registration at the end of the first quarter of 2006.
Companies Look Abroad for IPO
In addition to the 19 venture-backed companies that went public on US exchanges, three companies backed by US venture capitalists successfully went public on foreign exchanges, two on the London AIM and one on the London Stock Exchange.