VC-Backed IPO Market Weakens In Q3, But M&A Is On Fire

The IPO market is on the mend, but the revival is nothing to crow about.

There were 14 venture-backed IPOs during the third quarter, down slightly from 17 in the second, according to data from the National Venture Capital Association and Thomson Reuters (publisher of this blog). While the decrease isn’t alarming, the bigger picture is.

For the year so far, 40 venture-backed startups sold stock to the public. That is down from 55 for the first three quarters of 2007, the last good year before the financial collapse of 2008 and 2009. (Don’t ask about the stats for 2009. Only 12 companies launched offerings during the entire year.)

The dollar figures tell the same story. So far this year, VC-backed IPOs raised $3.5 billion. The total for the first three quarters of 2007 is more than double this level: $7.3 billion.

The M&A market is more encouraging, and, considering how much cash corporate America has in its pockets, the improvement is likely to continue. In the third quarter, 104 venture-backed companies were bought. That was up 7% from the second quarter, with the average deal size up a similar amount (among companies disclosing deal value).

The quarter’s results bring to 322 the number of companies sold so far this year — well above the 286 in the first three quarters of 2007.

The moral of the story: if you want to make some money, think M&A, not IPO.

(Double click on the table below to enlarge it.)