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Venture Capital - Monday, March 12, 2007

The Current Deficit Of VC/Angel Investments To Exits

Week in and week out we compile long lists of companies that have been funded, particularly by VCs. We always compile a shorter list of exits and some weeks it seems there are only a couple of exits Microsoft's Don Dodge addresses this disparity:

"Venture Capitalists invested $25.5 Billion in 3,416 companies in 2006. Angel investors invested about $26B in 50,000 companies. With $52 Billion invested in start-ups in 2006, there were only about $22B in exits. Acquisitions accounted for $16.6B while IPOs brought in $5.3B." His conclusion: "No matter how you look at it VCs and Angels are not doing very well."

We think that Dodge makes a valid point, however, we are a bit more patient. We see many profitable, high value startups that could find an exit but appear to be waiting for a better window. Even if quality startups cannot find a buyer or can't do an IPO on Nasdaq, there are other options -- an IPO on AIM or a reverse IPO for example. But we think these startups have confidence that a better exit is just around the corner.

Read - Venture Capitalists and Angels invest $40 Billion per year but see only $18B in exits