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Venture Exits Down, Capital Volumes Up in Second Quarter

New York Stock Exchange entrance (A. Kotok)

(A. Kotok)

The number of companies backed by venture capital achieving liquidity fell in the second quarter of 2011, but the amount of capital raised in the process rose significantly in that period. These data on venture-backed exits — companies gaining financial independence, usually through merger and acquisition (M&A) or initial public offering (IPO) — are compiled by Dow Jones VentureSource.

Start-up companies, like many of those formed to commercialize scientific or engineering discoveries, are funded by angel and venture capital (VC) early in their lifetimes. The investors get most of their investment returns when start-ups achieve liquidity, i.e. exit VC support.

In the second quarter of 2011, 109 companies achieved liquidity netting $11.2 billion dollars, according to Dow Jones VentureSource. This number of exits was down 13 percent compared to the second quarter of 2010, but the $11.2 billion in capital raised last quarter was 26 percent higher than last year at this time.

Most of the company exits — 91 of 109 — were by mergers and acquisitions. The 91 M&A deals declined from 105 in the second quarter of 2010, but the $9.2 billion raised represents a 28 percent increase over the $7.2 billion raised last year. The median $64 million paid for a VC-backed company was down slightly from $66 million in 2010.

Nearly two-thirds (65%) of the M&A deals were for software or consumer services companies. However, the largest M&A deal in the second quarter was the acquisition of Plexxikon, a developer of small-molecule pharmaceuticals in Berkeley, California, by Daiichi Sankyo for $805 million.

In the second quarter of 2011, the 14 IPOs were about the same as the 15 IPOs in the same period of 2010. But like M&A deals, the capital volume raised jumped from $859 million in 2010 to $1.7 billion in 2011. The median IPO collected $109 million in the second quarter of 2011, a 55 percent jump from the second quarter of 2010.

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