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New England’s venture capital industry had minimal participation in a Q2 rise in venture-backed companies going public, according to data released by Dow Jones VentureSource.
While the U.S. saw 15 initial public offerings worth $899 million in the quarter, New England states saw just one – the June 17 IPO of New Haven, Conn.-based Higher One Holdings Inc. (NYSE: ONE), which raised $37.3 million. The largest IPO of the second quarter and the year belongs to Palo Alto, Calif.-based Tesla Motors, a provider of electric vehicles, which raised $202 million in a public offering this Monday.
Venture-capital exits in the quarter came via merger and acquisition, with eight companies selling out to buyers. Only one deal involved financials that were publicly disclosed – the May acquisition of Marlborough’s Camiant Inc. by Tekelec for $130 million. The company was backed by a trio of Massachusetts VCs – Matrix Partners, North Bridge Venture Partners and Pilot House Ventures Group.
Nationally, 79 M&As raised $4.3 billion in Q2, VentureSource reported – a decrease in deal activity from the year-ago period, when 82 deals raised $2.9 billion. The largest M&A deal of the quarter belonged to San Mateo, Calif.-based AdMob, a developer of an online mobile advertising marketplace, which was acquired by Google Inc. for $750 million.
Exits have become so scarce, said Jefferies & Company Inc. vice chairman Paul Deninger, that VCs are treating their best portfolio prospects with precious care: investors aren’t willing to go public for a slightly lower valuation and modest liquidity with the risk something may go wrong with the IPO, he said.
“VC has inverted itself,” said Deninger, a 23-year veteran of IPO investment banking. “The VC industry used to be extremely conservative on how much they paid for a company and then they were relatively risky on exit. Now, they’ll pay a high price to get into the company, but then they are extremely risk-averse on exit.”
Dow Jones VentureWire editor Scott Austin said that nationally, M&A momentum slowed, “supporting investors’ sense that the venture recovery is vulnerable to setbacks.” He blamed the European debt crisis, “underwhelming” IPOs and increasing caution on the part of would-be strategic acquirers.
The full report is available here.
Editor's Note: Due to an error by Dow Jones VentureSource, an earlier version of this story overlooked the second-quarter IPO of Higher One Holdings Inc. (NYSE: ONE), which went public on June 17, raising $37.3 million.
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