NCVA, Deloitte: Health of World Venture Capital Markets Depends on Strong IPOs

Venture capitalists worldwide believe that the current IPO activity is too weak, and it will not support a healthy industry in their respective national economies.

In a recent survey by NCVA and Deloitte, approximately 80 percent of the polled venture capitalists said that their countries were registering very low levels of initial public offerings. The survey also reveals that many venture capitalists see the high returns from initial public offerings as key to achieving high returns to portfolio companies in development and to limited partners.

Venture capitalists from France, India, Brazil, China and the US were the most energetic in stating the importance of having a very active IPO market in their national markets, followed by Israel, Germany, Canada and the United Kingdom.

In the US, 91 percent of the respondents said that an active and healthy IPO market was vital to the country’s venture capital markets. However, only 36 percent said that other countries’ IPO markets had an impact over the success of the US industry.

Moreover, 87 percent of the polled venture capitalists said that the current US IPO activity was too low, as the global venture capital industry was looking to the US to provide a healthy market.

Worldwide, 87 percent of the participants in the survey said that the stock exchange with the greatest potential for venture-backed initial public offerings was NASDAQ, followed by NYSE, with 39 percent, and the Shanghai Stock Exchange, with 33 percent.

Deloitte & Touche partner, Mark Jensen, said that the industry was clearly still affected by the fallout of economic downturn, especially through a less than desirable number of exit opportunities. However, he added, as the liquidity crisis eases and the economy shows signs of improvement, a most sought-after turn of tide might be close.