VCs Pessimistic About IPO Outlook, Netflix Makes It Out Anyway –

There’s good news and bad news for the venture capital community. The good news: Venture capitalists think the overall harsh economic environment has bottomed out. The bad news: There’s no indication that VCs will rush back into the market. That’s according to Graham Watson, managing director at Deloitte & Touche Corporate Finance LLC, which just released its quarterly Silicon Valley Venture Capital Confidence Survey.

Deloitte’s most recent survey is its sixth since it launched its survey program in the first quarter of 2001. This quarter, it received 100 responses from area VCs. Only 5% of the surveyed VCs forecast that a return of a healthy initial public offering market for technology companies would come in 2002. Most of them, a whopping 85%, predict that relief would come in 2003 or 2004. However, 10% don’t expect IPOs for tech companies to rebound until 2005 or after.

However, VCs have decided the situation can’t get much worse. Most predict that the overall economic climate, exit valuations and time spent on portfolio companies would either ease or stabilize. Only 5% of respondents expect the economic climate to decline, while 10% expect exit valuations to decrease.

A few answers may reflect the situations of the individual survey recipients. When asked about the most important factor behind a recovery in VC investment levels, 57% of VCs pointed to an increase in technology spending as the most important factor, and 38% named a recovery in public market values as tops.

One company hoping to see a recovery in public market valuations is Netflix, which filed to go public on March 7. The Los Gatos, Calif.- based online DVD rental company successfully raised $85 million in an IPO on May 23. The company has raised a total of $102.44 million from venture backers such as Europ@web, Foundation Capital, Institutional Venture Partners, LV Capital, Technology Crossover Ventures, and West Coast Venture Capital.

Contact Charles Fellers at