Will Q4 Surge Continue Into New Year? –

In a sign that may bode well for the New Year, four venture-backed companies went public in December, up from just a single company in the same month a year earlier.

The strong showing in December – and in the fourth quarter in particular – helped VCs get more new issues out the door than they did a year earlier. For the year, 29 U.S.-based, venture-backed startups went public, an increase from 24 a year earlier. As a group, venture-backed issues raised $2.02 billion last year, down from $2.47 billion in ’02.

It looked like it would be a down year until the fourth quarter, when 17 VC-backed companies made it out, raising $1.04 billion. The average issue size of the deals so far this year is $70 million, a $33 million decrease from the $103 million average for the same period last year.

VCs can take heart that so many issues have been able to make it out, but they can’t be pleased with the aftermarket performance of so many of those issues. As noted in the chart, aftermarket performance peaked at 63% in July and has declined every month since then, hitting its lowest point (33%) of the year in December.

If you’re looking for a sector to blame, look no further than biotech. The sector had eight venture-backed IPOs in ’03, more than any other segment, but Wall Street turned on biotech as quickly as it warmed up to it. The average new venture-backed biotech stock was flat for the year, but one stock (Neurochem) boosted the group’s performance. Take Neurochem out of the equation, and the group’s overall share price falls by 15%

The big question going into the New Year is whether all the hype about Google – and, to a lesser extent, Salesforce.com – will translate into a bull market for venture-backed issues.

-Lawrence Aragon, Editor in Chief