Venture capital-backed IPOs have slowed to a crawl, but VC firms are still investing and raising funds at a steady pace, according to a new study published by PricewaterhouseCoopers LLP.
The report, titled “The Exit Slowdown and the New Venture Capital Landscape,” notes that VC-backed IPOs are at a 30-year low, with Q2 2008 marking the first quarter since 1978 with zero IPOs. However, other key findings point out more encouraging trends: 1) the exit slowdown will lengthen VC-back company life cycles, resulting in fewer but larger IPOs; 2) Despite the IPO drought and meager M&A market, VC are still investing and raising funds at a steady pace; 3) VC investment has remained strong in sectors such as clean technology and life sciences.
Experts expect that companies which are currently exit-ready will be even more stable and financially stronger as venture capitalists wait for the market to improve in a year or two from now. The slowdown in exits can also open the door for strategic investors, who may be able to find more attractive valuations of acquisition candidates in this environment, to meet their strategic goals.
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