Exit Data Dark For First Quarter - Another Cycle Begins

The credit-related traumas impacted exit activity in the first quarter, with only 5 IPOs and 56 M&A deals for venture-backed companies, down sharply from recent levels. 

We don't expect the IPO market will recover until after the election.  We would still expect modest volumes of acquisitions, albeit at lower prices.  Clearly, this is bad for existing venture investments,  stretching out returns. 

Anecdotally, we have not seen pricing of venture rounds come down to reflect these market conditions.  In some areas, like new media, where pricing has appeared excessive, there should be a meaningful correction.  Later stage valuations are also ripe for adjustment.  Generally, we expect pricing of venture rounds to come down over the next few quarters. 

This data marks a turn in the typical cycle.  We saw a similar price correction at the beginning of the decade after the combination of the bursting bubble and 9/11.  We made some of our best investments during that recovery period.  Prices were reasonable and companies needed to find more compelling marketing opportunities while maintaining capital efficiency.  We see the same circumstance starting in 2008, where lower pricing will provide a good start for new investments.