The momentum of venture-backed exits in the US last year did not continue into the new year, says Dow Jones VentureSource. "It's eye-opening for venture-backed M&A activity to be closer to levels seen in the first quarter of 2009, shortly after the collapse of the global financial markets, than in 2010, a year associated with recovery," said Jessica Canning, director of global research "Corporations have cash on hand and are willing to invest, but the deals aren't happening. Acquirers may feel that rising valuations have companies on the wrong side of the fine line between good deal and risky investment."
In the first quarter of 2011, 104 US-based venture-backed companies exited, raising $9.8 billion - a 21% decrease in exits and a 17% increase in capital raised from the first quarter of 2010 when 131 exits raised $8.4 billion.
Of these, 11 were IPOs, raising $768m, up eight IPOs that raised $711m last year. Healthcare companies are driving the IPO activity, accounting for 45% of IPOs in the most recent quarter and 57% of IPOs in the fourth quarter of 2010.
"US venture-backed companies are still struggling to go public and many of those that do hold IPOs are pricing lower than expected," said Scott Austin, editor of Dow Jones VentureWire. "But there are signs the second quarter could pick up -- the IPO pipeline remains strong and some companies may be waiting for their 2010 financial results to be audited before they try to price."
Currently 45 US venture-backed companies are planning an IPO. The largest IPO for a US-based company was the $107m for Colorado-based Gevo, a provider of biobased alternatives to petroleum-based products.
The biggest segment was trade sales, with corporate acquirers buying 91 companies for $8.9bn, a 22% drop in activity from the same period last year when 116 acquisitions netted $7.4bn. The largest M&A deal in the first quarter came from Ardian, a developer of medical devices to treat hypertension in Mountain View, California, which was acquired by Medtronic for $800 million, and again highlights the strength of medical startups.
Buyouts of venture-backed companies by private equity firms were also down from the same period last year, spending just $128m on two companies.
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