RESEARCH TRIANGLE PARK – The nation’s economic woes apparently won’t spare the venture capital industry.
Mark Heesen, president of the National Venture Capital Association, warned this week that recent strong returns for venture-backed firms could falter if Wall Street’s sour mood affects exits such as initial public offerings and financing for mergers and acquisitions.
“We continue to keep our eye on the economy in 2008 as the threat of a recession could stall the venture capital exit market – and that could impact returns negatively,” Heesen said.
The NVCA and partner Thomson Financial reported that venture-backed firms generative “positive” growth for the time horizons it measures on a quarterly basis. However, the latest report covered the third quarter of 2007. And as the year ended the economic jitters grew steadily worse.
“We expect these numbers to continue to trend positive for at least the next quarter as this past year saw some strong IPO’s and acquisitions that will support higher returns in the short run,” Heesen noted.
As for the fourth quarter, time will tell. Data on the performance of VC-backed firms runs a quarter behind other data on the industry, such as investments and fundraising. And who knows what the economic environment will be come spring time.
Thomson and the NVCA pointed out that private equity performance across 10-year and 20-year horizons “continue to significantly out-perform the public markets” across the VC business. However, they did note that the 10-year performance level did dip to 17.9 percent in the quarter compared to 19.3 percent a year earlier.
For a complete look at the Thomson data, check out the NVCA Web site.