The news continues to get a bit better for venture capital firms. And more could be on the way as an increasing number of VC-backed firms line up to go public.
For the first time since 2000, venture firms reported double-digit positive growth in the opening quarter of this year, according to statistics from Thomson Venture Economics and the National Venture Capital Association.
The 15.7 percent growth surge was dragged down by early and seed venture results (-2.9 percent). Later-stage VC companies produced 38 percent return. The other rounds — “balanced” VC — produces 20.5 percent.
The first quarter figures do not include much of the recent surge in IPO activity. The NVCA and Thomson reported earlier this month that 29 venture-backed firms went public in the second quarter, producing more than $2 billion.
The quarter is the second straight for positive returns. The fourth quarter of 2003 produced 8 percent growth, snapping a three-year losing streak.
“While the numbers do not yet reflect the most recent flurry of IPO activity, it is a continued validation that the venture capital and buyout industries are getting healthier,” said Jesse Reyes, vice president of Global Research at Thomson Venture Economics, in a statement.
According to The Washington Post, 120 companies have gone public this year, compared to 86 in all of 2003. Citing figures from a web site that tracks IPOs, The Post added that another 265 firms have filed notice with the Securities and Exchange Commission that they intend to sell stock.
Thirteen VC-backed firms went public in the first quarter, according to the NVCA and Thomson Venture Economics.
“Given the correlation between venture and public market returns, the industry has been the beneficiary of good public equity markets and healthier company exits,” Reyes said.
The report also said valuations for VC-backed firms are increasing.
Three-year VC returns remain negative, at –13.3 percent, but that is an improvement of –18.9 percent the previous quarter.
Five-year (22 percent), 10-year (26 percent) and 20-year (15.7 percent) returns remained “steadfast”, the report said.
The study noted that many firms that received venture funding between 1998 and 2000 “still face challenges building momentum.”