Even Fewer Profits for Venture Capitalists

The bad news for venture capitalists continues, especially when it comes to delivering profits.

Venture capitalists — who invest in private companies with the aim of profiting later when those startups get sold or go public — have seen the businesses of their portfolio companies suffer in the recession, their fund-raising get hurt by the gyrating stock markets, and have experienced a big hit to their profits. That’s because IPOs and mergers and acquisitions of startups have been scant.

The first quarter of 2009 was particularly horrible in this regard. According to new data out Wednesday, not a single venture-backed company went public in the three months that ended Tuesday. In fact, no venture-backed company has gone public in the last eight months as the market has see-sawed.

M&A exits fared just a little better, according to VentureSource, a research firm owned by News Corp., which also publishes The Wall Street Journal. Just 68 venture-backed companies were involved in an M&A event in the first quarter, generating $3.2 billion. That’s down 65% from $9.1 billion produced a year earlier and is the lowest quarterly total since 2003.

The full-text of this blog entry by Pui-wing Tam is available at the Wall Street Journal's Blog - Digit: Technology News and Insights, 4.1.2009.