Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Report: Venture Backed IPOs Rising As M&A Deals Plunge To Lowest Since 2003

Posted by Tom Foremski - July 6, 2015

The National Venture Capital Association reported that the number of initial public offerings (IPOs) for VC-backed companies rose 59% in the second quarter of 2015 compared with the first quarter of this year.

There were 19 biotech and other life sciences IPOs and eight in the IT sector for a total of 27 IPOs raising $3.4 billion. Fitbit was the largest IPO raising $841.2 million.

Mergers and acquisitions in the same period reached the lowest number of deals since the first quarter of 2003. However, deal value increased 86% from the first quarter.

There were 54 M&A deals in IT and just nine in life sciences. The largest deal in the quarter was LinkedIn's $1.5 billion acquisition of online tutor Lynda.com.

“As has been the case over the last several quarters, life sciences companies continue to lead the way," said Bobby Franklin, President and CEO of NVCA. "On the heels of FitBit’s successful IPO, we will be watching to see if there is increased parity between the number of life sciences companies and technology companies making public offerings as the year progresses.”

There are 55 companies that have filed plans for an IPO with the SEC and an unknown number of confidential IPO applications made under the JOBS Act.

Foremski's Take:  The IPO market is becoming more attractive to startups than an acquisition and that's great. It is very good for innovation if startups can stay independent because there is more competition in markets and pressure on prices.

Scale is important to success, but if that's all it takes to be successful, it limits the growth of innovative startups. If the strength in IPOs continues it will result in a far healthier venture capital industry and larger investments in independent companies capable of challenging the status quo.

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