Venture-backed IPO drought worst in 30 years

By Anupreeta Das

SAN FRANCISCO (Reuters) - U.S. venture capitalists blame hibernating credit markets and skittish investors with no appetite for new stocks for a venture-backed IPO drought unlike any seen in the past three decades, according to a new survey.

Not one venture-capital-backed U.S. company made an initial public offering in the second quarter, the National Venture Capital Association found. The last time a quarter went by without a public debut by a VC-backed company was in 1978.

The NVCA, which represents nearly 500 U.S. venture capitalists, has called the current situation a "capital markets crisis" for the start-up community.

There were only five VC-backed IPOs in the first quarter. Last year, there were 86 such IPOs between January and June.

"Flash forward and see venture capitalists, who by their nature are optimists, saying they don't see the IPO market opening in the next six months, you see an extremely serious situation," NVCA President Mark Heesen said in an interview.

In the NVCA survey of 662 venture capitalists, 43 percent said it would take at least 12 months for the markets to become more welcoming. Another 32 percent said it would take up to two years.

Venture capitalists fund start-up companies, aiming to make several times their initial investment when they eventually go public or get sold. Web companies that are now household names, such as Google Inc (GOOG.O: Quote, Profile, Research), Amazon.com Inc (AMZN.O: Quote, Profile, Research) and Yahoo Inc (YHOO.O: Quote, Profile, Research), were all once start-ups, and gave their venture capital backers outsized returns when they went public.

The median age for a VC-backed company when it goes public is nearly nine years. But now, venture capitalists may have to keep these companies for even longer and therefore have less time and resources to invest in new start-ups, Heesen said.