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Outlook good for venture-backed exits and IPOs

New data suggests that venture-backed start-ups have good prospects to being acquired or filing for an IPO at high valuations in 2010.

New data released from the National Venture Capital Association shows evidence of a rebounding acquisitions and IPO market for venture-backed companies in the first quarter of 2010.

According to the Exit Poll report (PDF) by Thomson Reuters and the NVCA, Q1 2010 ended with nine venture-backed initial public offerings (IPOs) and 111 merger and acquisition transactions.

Additionally, there were 31 disclosed venture-backed M&A exits averaging $180.2 million, 21 percent higher than the total average disclosed transaction value for all of 2009. As the chart below shows, the funding-to-exit ratio for software and Internet start-ups was roughly 4 to 1, a surprisingly high statistic.

Venture-backed M&A industry breakdown
Venture-backed M&A industry breakdown Thomson Reuters & NVCA

Highlights from the report:

  • As of March 31, 2010, 111 venture-backed M&A deals were reported for the first quarter quarter, 31 of which had an aggregate deal value of $5.6 billion.
  • The information technology sector led the venture-backed M&A landscape, with 81 deals and a disclosed total dollar value of $2.3 billion.
  • There were nine venture-backed IPOs valued at $936.2 million in the first quarter of 2010 quarter of 2009, more than double the amount raised during the fourth quarter of 2009.
  • Three of the eight IPO exits for the quarter were in the biotechnology sector, accounting for a total of $310.5 million.
  • Of the nine IPOs in the first quarter, eight were trading at or above their offering prices as of March 31, 2010.
  • Forty-three venture-backed companies are currently filed for an initial public offering with the SEC.

All of this data is good news for entrepreneurs who may have had their confidence shaken by the apparent dearth of recent exits. The data should also help venture firms feel more comfortable making investments in areas such as computer hardware that may have lagged recently.