VC-backed IPOs dry up in Q1

There was a 65% drop in IPOs in Q1 backed by venture capital funds, but biotech companies were well represented.

The first quarter of the year was the slowest since the third quarter of 2011 in terms of total amount raised in venture capital-backed initial public offerings (IPOs) in the US.

Six venture-backed IPOs, all from biotech companies, raised $574.5 million in the first quarter, all listing on the NASDAQ stock exchange, according to data compiled by Thomson Reuters and the National Venture Capital Association (NVCA). This is down about 60 percent compared to the first quarter of 2015, when 17 companies raised $1.43 billion.

In the third quarter of 2011, five companies raised $475.9 million. That same year, the first quarter saw 14 venture-backed IPOs raising $1.52 billion.

“A strong IPO market requires a stable market for public stocks,” said Bobby Franklin, president and CEO of NVCA. “Due to a sustained period of turbulence in the public markets at the start of the year combined with non-traditional investors making direct investments into later-stage startups, venture-backed IPO activity in the first quarter was nearly non-existent.”

Five of the six IPOs were from US-based companies. The largest offering of Editas Medicine, a Massachusetts-based drugmaker, raised $108.6 million on 2 February. Beijing, China-based BeiGene, a biopharmaceutical company, raised $182.2 million in the largest IPO for the quarter. Five of the companies brought to market in the first quarter are currently trading at or above their offering price.

Some of the venture capital firms invested in these companies include Flagship Ventures, Polaris Partners, and CITIC Capital Holdings.

All six of the first quarter's offerings were life sciences IPO's, marking the first time that no venture-backed technology companies listed publicly since the first quarter of 2009, according to a statement from the NVCA.

“Despite the successes of a handful of venture-backed biotechnology companies making IPOs, the IPO window for venture-backed companies from other sectors has been completely shut,” said Franklin in the statement. “While this may cause some to panic, venture capital is a long-game business and seasoned venture investors have lived through these slowdowns before.”

Currently, 43 venture-backed companies are registered for an IPO with the US Securities and Exchange Commission. As venture investors wait for the IPO window to open again, they are “keeping calm and carrying on” by focusing their attention on growing and maintaining their portfolios of the next generation of great American companies, said Franklin in a statement.