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"While we're not seeing 2007's double-digit totals, the liquidity market for U.S.venture-backed companies is showing signs of a significant thaw," Jessica Canning, director of global research for Dow Jones VentureSource said. "The trickle of venture-backed IPOs over the past two quarters appears to be growing into a steady stream, which is a welcome sign of recovery for investors."
Scott Austin, editor of Dow Jones VentureWire, a prominent industry newsletter, said: "There are certainly hints of optimism. Public investors are taking chances on IPOs again and corporate acquirers are shopping for promising start-ups in select industries. But the reality is that 2009 will remain a slow year for venture exits overall. Based on conversations with industry insiders, I'd expect to continue seeing massive consolidation in certain sectors and a high level of asset sales. Most venture investors are looking to 2010 for a rebound."
The $451.25 million venture-backed companies generated through two IPOs in the third quarter is largely thanks to A123 Systems garnering $371.25 million in a late September IPO.
M&A Market Still Soft, Despite Low Prices
According to VentureSource, M&As raised $2.25 billion in the third quarter of 2009 through the sale of 71 companies, down 56% from the $5.16 billion raised in the same period last year. The $22 million median amount paid for a venture-backed company in the most recent quarter is a 52% drop from the $46 million median paid during the same period in 2008.
"While it appears that the market is still holding back despite lower valuations, an upswing in M&A activity is on the horizon," said Ms. Canning. "We will see an influx of more than $1 billion if Amazon.com's purchase of Zappos and CA's purchase of NetQoS close as planned in the fourth quarter."
Less Money, More Time Needed To Achieve Liquidity
In the third quarter, companies raised a median of $16.50 million in venture capital before achieving liquidity through a merger or acquisition. This is 21% less than the $20.85 million median seen during the same period last year. In addition, it took a median of 6.13 years, 23% more time than the 5-year median in the third quarter of 2008,for a venture-backed company to reach liquidity via a merger or acquisition.
The largest M&As of the quarter belonged to the tech industry with VMware purchasing SpringSource, a provider of enterprise Java infrastructure software, for $362 million and Intuit paying $170 million for PayCycle, a provider of online self-service payroll for small businesses.
In addition to the A123 Systems IPO, LogMeIn, a Woburn, Mass.-based provider of on-demand remote connectivity solutions for the enterprise, completed an $80 million public offering in July.
About Dow Jones VentureSource's Research Methodology
The investment figures included in this release were collected by surveying professional venture capital firms, through in-depth interviews with portfolio company CEOs and CFOs, and from a number of secondary sources. These statistics represent equity investments into early-stage, innovative companies only and do not include companies receiving funding solely from corporate, individual, and/or government investors, or from buyout or other non-VC investment firms.
For deeper analysis, download the complete report from Dow Jones VentureSource at www.fis.dowjones.com/VS/3QUSLiquidity.html.
For more information, please call 603-864-8873 or e-mail kimberly.gagliardi@dowjones.com. You can also follow the story at www.twitter.com/djventurewire.
No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.
Copyright 2009, Dow Jones VentureSource
About Dow Jones
Dow Jones & Company (www.dowjones.com) is a subsidiary of News Corporation (NASDAQ: NWS, NWS.A; ASX: NWS, NWSLV; www.newscorp.com). Dow Jones is a leading provider of global business news and information services. Its Consumer Media Group publishes The Wall Street Journal, Barron's, MarketWatch and the Far Eastern Economic Review. Its Enterprise Media Group includes Dow Jones Newswires, Factiva, Dow Jones Client Solutions, Dow Jones Indexes and Dow Jones Financial Information Services. Its Local Media Group operates community-based information franchises. Dow Jones owns 50% of SmartMoney and 33% of Stoxx Ltd. and provides news content radio stations in the U.S.
PLEASE NOTE:AVentureSource does not include Amazon.com's acquisition of Zappos in the M&A count becauseas of 9/30Athe deal hadnot officially closed, according toAAmazon.com and Zappos.
CONTACT: Kim Gagliardi, Dow Jones & Company Tel: +1 603 864 8873 e-mail: kimberly.gagliardi@dowjones.com VentureSource WWW: http://venturecapital.dowjones.com
((M2 Communications disclaims all liability for information provided within M2 PressWIRE. Data supplied by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to info@m2.com.
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