Four venture-backed companies managed to go public in the final quarter of 2002, raising a total of $230 million. This tally represents a marked improvement over the solitary deal that priced in Q3, but it was still not enough to salvage what turned into the slowest year in venture-backed IPOs since disco was king.
Just 23 venture-backed companies went public in 2002, with only nine of them trading above their IPO offering prices as of market close Jan. 14. This is the smallest number of venture-backed deals to price since 1978, and the $1.97 billion raised is the smallest take since $1.19 billion was raised by 63 companies in 1988.
The year’s largest deal came from Veridian Corp. (NYSE: VXN), an Arlington, Va.-based company that priced 13.5 million shares at $16 per share back on June 4. The $216 million offering was good news for Rho Ventures, which maintained a 4.98% equity stake in Veridian ever since the government and defense-based IT systems developer acquired a Rho Ventures portfolio company in 1999.
The year’s top gainer was Pittsburgh-based retailer Dick’s Sporting Goods Inc. (NYSE: DKS), which was trading at $20.95 per share at market on Jan. 14, after pricing 7.28 million shares at $12 per share on Oct. 16 of last year (a 75% gain). Fourcar BV made off with the $20.4 million in the IPO, selling 1.7 million shares for $12 apiece. But Paul Allen’s Vulcan Ventures was the biggest venture winner. Vulcan sold 841,000 shares in the IPO for $10 million, and then wisely held on to the rest of its shares (1.2 million shares, or 10.8% of the company), which were worth $25.1 million at market on Jan. 14. Other Dick’s investors include Bayview Investors, Bessemer Venture Partners, Boston Safe Deposit & Co., Credit Suisse First Boston (which owned some of its shares through Sprout Group), Northwood Ventures and Oak Investment Partners.
Prior to Dick’s offering, HealtheTech (Nasdaq: HETC) was the last venture-backed company to go public. It sold 4 million shares at $7.50 a pop on July 12. The Golden, Colo.-based health monitoring device maker had raised $70 million from a list of venture capitalists that includes Berringea, New England Partners, Palm Ventures and Proctor & Gamble Co.
The drought from the start of July to mid-October marks the lowest combined venture-backed IPO tally since the second quarter of 1978.
Other big gainers in the fourth quarter include IT services company SRA International (NYSE: SRX) and online payment services provider PayPal Inc. (Nasdaq: PYPL). SRA, whose lead VC backer is General Atlantic Partners, was trading at $29.36 per share on Jan. 14, after pricing 5 million shares at $18 per share on May 24 (a 63% gain). PayPal has experienced a 56% gain after pricing at $13 per share on Feb. 15, which must please lead investor JPMorgan Partners.
Health care service companies led all sectors in venture-backed IPO proceeds, with $355.7 million from three offerings. The medical devices and equipment sector came in second with $329.9 million raised for four companies, followed by information technology with $306 million from two deals.
The lack of IT dominance was most apparent in the fourth quarter, when none of the four offerings had a pure technology bent. In addition to Dick’s Sporting Goods, hospice services provider VistaCare Inc. (Nasdaq: VSTA) raised $72 million, sandwich shop Cosi Inc. (Nasdaq: COSI) raised $38.9 million and health care software developer Impac Medical Systems Inc. (Nasdaq: IMPC) raised $32.8 million.
The fourth quarter was so brutal that 10 venture-backed companies withdrew IPO registration papers from the SEC. The most notable was GMP Cos., a health care technology provider that was hoping to raise $172.4 million. The Ft. Lauderdale, Fla.-based company filed its S-1 documents in late 2000, and has received private funding from such companies as Texas Pacific Group; J&W Seligman and Motorola Ventures.