A poll conducted by the National Venture Capital Association confirmed the view that 2008 financial carnage was equally punishing on venture-funded startups.
In the three months that paralleled one of the largest market meltdowns in 70 years, there wasn’t a single public stock offering, and only 37 mergers and acquisitions.
IPOs, or Initial Public Offerings, allow investors in private companies to sell their ownership shares to the public and “exit” with their investment and profit.
Mergers and acquisitions allow investors to sell their stakes to buyers.
The six IPOs in 2008 were the fewest since 1977 and included one IPO in San Diego.
CardioNet, which makes heart-monitoring devices, raised $56 million in March. Another San Diego life sciences company, Phenomix, called off its IPO on Oct.23 because of unfavorable conditions.
Phenomix had planned to raise $86 million to fund drug studies, but instead partnered with Forest Laboratories of New York City to develop a diabetes drug.
Of the six IPOs, only CardioNet is trading above its $18 offering price.
“The most significant impact of the U.S. financial crisis on the venture capital industry has clearly taken place in the exit markets,” said Mark Heesen, president of the NVCA. “The inability of our strongest companies to go public and the softening of acquisitions activity continue to have a major ripple effect that now reaches every state of the venture investment life cycle.”
Consequently, the NVCA expects investments and fundraising to slow this year until exit markets return to normal.
Markets deflated around the world last year, delivering their worst performances since the 1930s. The S & P; 500 Index fell 38.5 percent, the worst since 1937; the Dow Jones Industrial Average fell 33.8 percent, its worst since 1931; and the Nasdaq Composite Index fell 40.5 percent, its worst on record.
The preliminary report by the NVCA doesn’t include merger and acquisition activity in San Diego.
Kevin Carroll, executive director of AeA San Diego Council, said federal defense spending, along with a well-diversified economy, will help buffer the region.
“(Businesses) are in a holding pattern. I don’t think they’re adding people, but it’s oddly quiet,” said Carroll, whose organization is merging with the Information Technology Association of America.
The 37 deals in the fourth quarter included 15 with a disclosed value of $2.9 billion.
Send technology news items to Ned Randolph at nrandolph@sdbj.com.
