Venture Exits – Year Drags to a Close – Prospects Better for 2006

In 2005, 56 venture-backed IPOs raised a total of $4.5 billion, down 40% from $11 billion in 2004, according to Thomson Venture Economics and the NVCA.  Google raised $1.2 billion in 2004. 

M&A activity was $14.4 billion in 2005, down from $15.4 billion in 2004. 

Average disclosed deal value was $91.5 million in 2005, up from $83.4 million in 2004.  Out of 154 deals, roughly 1/3 returned more than 4x the investment, 1/3 1x-4x, and 1/3 less than the amount invested. 

What are the prospects for 2006?  Anecdotally, including our own portfolio, there appear to be more companies positioned for attractive exits, even IPOs.  It's been tough for companies to grow against entrenched competition.  As a consequence, the current graduating class of companies boasts more differentiable technologies and more efficient business models.  This should help exits in 2006.