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Venture-Backed IPO Tally: Zero
A survey of 662 venture capital investors showed that 91 percent of investors view the lack of initial public offerings as "critical" to the future health of the venture capital and entrepreneurial communities. Most investors attribute the drought to skittish investors and the widespread shortage of money for borrowing. Seventy-five percent of investors don't expect to see successful public offerings during the next year or two, while 5 percent expect the drought to last longer than two years.
At Core Capital Partners, a venture capital firm in the District, some start-ups are opting to merge with other promising companies with plans of going public once the economy improves, said managing director Mark Levine.
Some start-ups are raising new rounds of financing large enough to sustain them until the market looks brighter. For instance, San Francisco-based Yelp this year raised $15 million in funding in part because of the weak economy.
But start-ups will most likely hire fewer people as they try to conserve cash, which could have negative repercussions on the job market, said Don Rainey, general partner of GroTech Ventures in Vienna.
"If a 14-person company doesn't hire an additional three people, it won't really be noticed. But if a million small companies stop hiring, that will have ripple effects," he said.
There may be an upside, however, to the lack of large public offerings, said Jonathan Aberman, managing director of McLean-based Amplifier Ventures. Because it takes longer to recoup their large investments in a company, venture capitalists may opt to put smaller sums toward younger companies, creating more opportunities for entrepreneurs.
"A lot of people are feeling the pressure right now to start thinking about better ways of recycling capital," Aberman said. "But it's not a permanent problem; it's a cyclical problem."