Optimistic Signs?

Posted by Dave Broadwin on October 02, 2009

VentureWire had this to say yesterday:

A perceived opening of the IPO markets is the focus of most of investors' optimism. There were two venture-backed IPOs in the quarter, A123 Systems Inc. and LogMeIn Inc., one fewer than the last quarter.

Public-offering activity is not expected to pick up quickly because of the "time it takes to run the SEC gauntlet," Ward said. However, a small number of successful offerings from companies like Ancestry.com Inc. and Fortinet Inc. - a Meritech portfolio company - could "set the table in the fourth quarter for what should be a good 2010."

The two IPOs from the third quarter raised a total $460.4 million, up from $232.1 million last quarter.

With successful recent offerings from companies like LogMeIn, OpenTable Inc. and SolarWinds Inc., public investors are showing a healthy appetite for small-cap technology stocks.

Unfortunately, they also had this to say about acquisitions:

The third quarter saw 71 acquisitions, seven fewer than the second quarter and 13 fewer than the same quarter a year ago. Nine of the companies sold were in life sciences with a combined value of $186.2 million, down from $324 million in the previous quarter and $864.7 million in the year-ago quarter. Combined with the absence of any health care companies going public, it made for one of the worst periods for health care liquidity in recent memory.

The venture economy (and the rest of the economy -- I think) has been suffering from the acute pain of the Great Recession. As it goes away, we will find out if there are other problems that were masked by the recession. If there are not, it does seem as though we should see a return to IPO and M&A exists that will bring back an appetite for investment.

Tags:
IPO
M&A

Comments RSS Feed

No comments yet

Start the discussion by using the form below

Dave Broadwin Partner

Dave heads the Emerging Enterprise Center. His practice focuses on representation of technology companies from start up to exit. Dave also handles venture financings, merger...

Prithvi Tanwar Associate

Prithvi Tanwar is an Associate in the firm’s Business Department. His practice focuses on advising emerging life science and technology companies as well as U.S....

Q1 venture activity levels and what will Q2 show?

It has been a long time since I wrote a blog post. In part, I just ran out of steam. In part, I have been running non-stop since May. Why? Because business has picked up in a major way. Since May the pace of financings and exits has picked up in a very noticeable way. So, here is a prediction, when I write the comparison of Q2 deals published by by Foley Hoag, Fenwick, it will show a major jump from the Q1 numbers.

Here is what my partner, Dave Pierson, had to say about Q1 activity, “The total number of New England Series A transactions dropped 46% from Q4 …. The total number of New Englsnd Series B and Later round transactions during Q1 decreased 21% from Q4…”

Fenwick had similar observations. Fenwick had this to say, “Venture capitalists invested $6.4 billion in 661 deals in the U.S. in 1Q11, compared to $7.6 billion in 735 deals reported in January 2011 for 4Q10, according to Dow Jones VentureSource (“VentureSource”). Although this represents a 16% decline in dollars and a 10% decline in deal volume from 4Q10, the 1Q11 results were generally flat with the average of $6.6 billion raised per quarter in 2010.”

All I can say is that either Foley Hoag is lucky or the venture world took off in Q2.

Here is the open question, given the turmoil in the public markets, will I have written plenty of new posts and be lamenting the amount of time available for such pursuits?

Without further adieu, below is the same table I produce each quarter. This is, of course, a table reflecting Q1 activity.

Term	Foley Hoag New England Series A	Foley Hoag New England Series B and Later	Fenwick Silicon Valley All Series
Cumulative Dividends	42%	52%	8%
Preference with Participation	42%	35%	43%
Redemption	85%	82%	20%
Pay to Play	15%	40%	5%

There is no surprise in these numbers. They have followed a consistent pattern from quarter to quarter for as long as I have been tracking them. Note the greater frequency of dividends and redemption provisions in New England deals. Having wondered about why there is not convergence on terms, given that so many of the leading venture firms do deals on both coasts and having asked a number of people in the business about it, I have come to the conclusion that it the divergence in these terms reflects a basic cultural bias. New England just has more of a lender mentality than the Valley.

Download & read (PDF)

EEC Events Calendar

About Us

The Emerging Enterprise Center Blog is where we plan to cover a wide range of topics that arise from our...

Emerging Enterprise Center Blog

Emerging Enterprise Center at Foley Hoag LLP

Bay Colony Corporate Center, North Entrance
1000 Winter Street - Suite 4000

Waltham, MA 02451

tel:

781 895 5900

fax:

781 895 5999

Foley Hoag LLP

Seaport West
155 Seaport Boulevard

Boston, MA 02210-2600

tel:

617 832 1000

fax:

617 832 7000

Foley Hoag LLP

1875 K Street., N.W., Suite 800

Washington, D.C. 20006-1238

tel:

202 223 1200

fax:

202 785 6687

Blog design, marketing and support by LexBlog™

Emerging Enterprise Center Blog - Commentary and Analysis For Entrepreneurs and Startups

Foley Hoag LLP