The Incredibly Shrinking IPO Window –

The IPO window keeps getting smaller and smaller. Just a single venture-backed company made it out in March (Aspreva Pharmaceuticals), down from seven in February and down from six in March 2004. For the first three months of the year, 10 VC-backed companies have gone public, compared to 12 in the first quarter of 2004.

Those numbers look worse when you dig into the IPO prices and their performance in the aftermarket. The average new VC-backed issue priced at $12.96 in the first quarter of 2004 and rose to $13.96 by the end of that quarter, for an average increase of 8 percent.

In contrast, the average new VC-backed issue in Q1 2005 priced at $10.23. That’s $2.73 less than comparable shares in Q1 2004. Worse, the average closing price for Q1 2005 venture-backed IPOs sank to $9.78 by the end of the quarter, down 4% from its IPO price.

M&A is looking more and more like the most attractive exit strategy.