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Venture-Backed Exit Value Up, Numbers Down in Q1 2011

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The number of exit deals for new companies in the U.S. backed by venture capital (VC) in the first quarter of 2011 dropped, while the total value of the deals increased compared to the same period in 2010. Science-based companies figured prominently in the first-quarter deals involving VC-backed enterprises.

Data on exits, where enterprises backed by VCs become financially self-sustaining, are compiled by Dow Jones VentureSource, and include mergers, acquisition, and initial public offerings (IPOs). The total number of exit deals dropped in the first quarter of this year to 104, compared to 131 in 2010. However, the value of the 2011 deals rose to $9.8 billion, a 17 percent increase over 2010.

All but a few — 91 of 104 — exit deals in the first quarter of 2011 were mergers or acquisitions (M&As), a pattern similar to 2010. Likewise, in both 2011 and the first quarter of 2010, nine in 10 exit deal dollars went into M&As.

Nearly half (45%) of the M&A deals in the first quarter of 2011 involved health care companies, a category that includes biotech and  medical device developers. The largest M&A deal was recorded by Ardian of Mountain View, California, a developer of medical devices to treat hypertension, acquired by Medtronic for $800 million.

VentureSource reports that VC-backed companies last quarter getting their M&A deals faster and generating a higher return than the same time last year. Enterprises were able to get buyouts in a median period of 4.6 years, in the first quarter of 2011, compared to 5.1 years in 2010.

The median value of M&A deals for venture-backed companies was $55 million last quarter, compared to the $21 million median in 2010. Of the 2011 buyouts, VCs invested a median of $13 million, a 38 percent decrease from $19 million in the first quarter of 2010.

IPOs, where companies first sell their stock to the public, increased from 8 to 11 in 2011, compared to the first quarter of 2010. The value of the IPOs also increased 8 percent from $711 million to $768 million.

The largest IPO for a U.S.-based company was the $107 million offering by Gevo in Englewood, Colorado, a provider of biobased alternatives to petroleum-based products. The median amount of venture capital raised prior to an IPO dropped 44 percent to $87 million in the first quarter of 2011. The median amount of time it took a company to achieve an IPO fell to 6.2 years from 9.2 years in same period last year.

Read More: IPOs, Mergers for Venture-Funded Companies Gain in 2010

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