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Quote of the Week: Better Exit Tactics Wanted

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February 1, 2012

“Rather than lamenting the lack of exit markets, the venture industry needs to create better companies for exits, or learn to cut its losses early and at least produce liquidity where it cannot create performance.”

 

Who said it: The Go4Venture Team

 

In Context: The editors of Go4Venture’s monthly transaction index newsletter, which reported that dealmaking was up in 2011 by seven percent, points out that the venture capital industry is experiencing several emerging trends, such as the rise super angel funds, and a marked increase in the number of growth equity deals. The growth equity market opportunity is in part driven by traditional exit markets being closed. AIM in London is “anaemic”, M&A is slow with dealmaking at its slowest start to a year for nearly a decade, and US public market investors pump up the price at IPO, only to dump the stock quickly, causing share prices to fall post-IPO (which makes it difficult for investors with lockups to make good returns). In the growth segment, investors are not only venture funds that have a later stage focus, but also buyout funds running buy and build strategies for companies originally venture-backed. The implication of the quote we published here is that VC are being exhorted to do “single secondaries” to exit earlier and better, even if that “means leaving money on the table”. To make it work, deeper pocketed VCs have to be prepared to pay a “decent price to a competitor” to propel the company for a while longer just like buyout funds do. Image Source: Go4Venture

 

Where we found it:Monthly VC Bulletin, Go4Venture

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