Eighty one percent of venture capitalists believe an active IPO market is essential to the success of the venture capital industry, according to the 2011 global trends in venture capital survey, issued by Deloitte, the business advisory firm, the British Private Equity & Venture Capital Association (BVCA), and other national associations. The majority of respondents (84%) surveyed felt that current levels of IPO activity were too low to support a healthy venture capital industry.
The survey indicates that the majority of venture capitalists think that without the higher returns generated by IPOs, the exit opportunities offered by M&A alone are not compelling enough to draw limited partner interest over the long term. The UK respondents thought that an active IPO market was essential for the success of the industry, for the following reasons: to provide superior returns to limited partners (42%), provide growth capital to developing portfolio (33%), and access to capital required to compete (21%).
David Halstead, Deloitte technology partner, comments: "The survey results highlight that the venture capital industry is still feeling the ripple effects of the economic downturn and the industry is still concerned about limited partner interest in the long term. However, with signs of an upturn in IPO activity in recent months and the easing of the liquidity crisis, the tide seems to be turning. We are already seeing strong investor appetite in the marketplace for equity in public companies, which could help spur tremendous economic value if the IPO process can be jump-started again."
Mark Florman, Chief Executive of the BVCA, comments: "The past few years have not been kind to UK IPOs in particular, and with turmoil on the euro area periphery, public markets remain stubbornly resistant to all but a handful of new issues. What this survey demonstrates is just how much of a barrier there has been to venture capitalists looking to exit or grow their companies. If public investors can re-discover their appetite for fast-growing, innovative companies, then not only will venture capital funds benefit, but so will their own portfolios."
Download: 2011 Global Trends in Venture Capital slides
Factors for IPOs to succeed
Healthy investor appetite for equity in public companies (84%), followed by economic stability (68%) and freely available capital (43%) were cited as the most important factors to create a healthy and vibrant IPO market.
Sectors to watch
Globally, the sectors that respondents planned to invest in over the next five years included: cloud computing (69%), new media/social networking (65%) and clean technologies (62%). The hot UK sectors were clean technologies (68%), cloud computing (60%) and medical devices and equipment (48%).
Favoured stock exchanges to list
Globally, NASDAQ (87%) was the most popular choice of stock exchange for venture-backed IPOs over the next 5 years, followed by the New York Stock Exchange (NYSE) (39%) and the Shanghai Stock Exchange (33%). In the UK, NASDAQ (73%) remained first choice for stock exchange listings. However, domestic markets for IPOs were still significant, with the UK respondents choosing London Stock Exchange AIM (59%) and London Stock Exchange (41%), as the second and third most promising stock exchanges.
NOTES TO EDITORS
The global survey of 341 senior venture capital executives, including 37 UK respondents between February and March of 2011. The following countries participated in the survey: USA, Canada, Brazil, China, France, Germany, India, Israel, and the UK.
About Deloitte:
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.
Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited
About the BVCA:
The British Private Equity and Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 480 members, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.
