IPO market slowest since 1975

If the tech industry is to hold onto its reputation as a miraculous fountain of wealth, the ongoing parade of M&A exits for startup companies needs to break out and become another IPO bubble. IPOs create wealth, jobs and irrational — but necessary — enthusiasm for further tech innovations.
Sad to say, it’s not happening yet. The number of venture-backed companies which went public in 2008 and 2009 was the lowest for any two-year period since 1974-75, according to data published this morning by the National Venture Capital Association and Thomson Reuters. Instead, there was a modest uptick in acquisitions. (Dow Jones VentureSource published similar findings today.)
There were only five venture-backed IPOs in the fourth quarter of 2009, according to NVCA’s report. It concludes that “the last two years have been the slowest consecutive years for US venture-backed IPO activity since 1974-1975.” NVCA counted 67 deals, of which 36 were disclosed. The average sale price was $215.9 million, the highest since the fourth quarter of 2007.
The report counted 13 venture-backed IPOs in 2009. That’s double the count for 2008, but nothing compared to the 94 in 2004 or the 86 in 2007. The largest IPO of last quarter was a $300 million offering by KAR Auction Services, an automotive services holding firm based in Carmel, Indiana. (Carmel is also home mobile search giant ChaCha.)
But with only a handful of IPOs, drilling down into them to plot trends would be bad math. The only clear trend is no IPOs. NVCA notes that the average offer amount for IPOs in 2009 was $149.4 million, higher than any year from 2004 to 2008. But the total size of the IPO market was only $1.9 billion, one-fifth that of banner years 2004 and 2007.
Yes, there’s a general consensus that liquidity is returning to the tech sector. But the study’s findings point to a familiar theme for 2010: “Please, God, just one more bubble.”
[Illustration: Norman Rockwell. Charts: NVCA]