Seventeen companies funded by venture capitalists made their US stock market debuts during the final three months of last year, contributing to the busiest quarter for initial public offerings in three years, according to figures released Monday.
The venture-backed IPOs completed in the fourth quarter represented the most since the final quarter of 2000, when 21 startups seeded by venture capitalists ripened into public companies, based on data compiled by Thomson Venture Economics for the National Venture Capital Association.
The venture-backed IPOs represented a chunk of the 46 companies that went public during the fourth quarter. The overall volume of IPOs reached its highest level since the third quarter of 2000, when 113 companies first sold their shares in the US stock market.
Although more venture-backed companies sold their IPOs during the fourth quarter of last year, they didn't command premium prices.
Venture-backed IPOs raised US$1.05 billion, or an average of US$61.7 million per deal completed in the fourth quarter. Since 2000, venture-backed IPOs have raised an average of US$85 million per deal, according to the Venture Economics data.
Still, the upturn in successful IPOs heralds a renewed investor interest in young companies after several years of disdain triggered by the dot-com bust.
Fueled by bullish analyst reports, hundreds of unprofitable tech startups launched IPOs during a late 1990s frenzy that saddled investors with devastating losses after many of those businesses collapsed.
The backlash stung venture capitalists particularly hard because the industry depends on the stock market to liquidate its investments. That option had almost dried up by mid-2002. From July 2002 through June last year, just eight venture-backed companies launched IPOs, according to Venture Economics.
With IPOs out of favor, many venture capital firms suffered the worst losses in their history and curtailed their investments in startups.
As the stock market surged last year to its best returns since 1999, investors became more willing take a chance on IPOs -- a high-risk asset class that dangles the prospect of quick windfalls.
The greater risk tolerance is helping venture capitalists usher their startups back to the stock market. After just one venture-backed company went public in the first quarter of last year, 28 more completed IPOs during the final nine months of the year.
It's an encouraging trend, but probably still not enough to spur a significant increase in venture capital investment this year, said Mark Heeson, president of the National Venture Capital Association.
The industry trade group expects venture capitalists to invest about US$16 billion this year, about the same amount as last year. Venture capital investment peaked at US$106 billion in 2000, when 215 venture-backed IPOs were completed.
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