Venture-backed IPOs Pick Up

Venture-backed IPOs are on track for their best quarter in over a year, according to deal-tracker Thomson Financial, as the new-issues market slowly revives from dormancy.

As many as 15 deals with venture capital funding are expected to price in the fourth quarter, up from 8 in the third quarter and the most since the 16 of the second quarter of 2002. Already, 7 VC offerings, valued at approximately $570 million, have begun trading since October.

"We are seeing a return of VC-backed IPOs," said Kathy Smith, an analyst at IPOHome.com.

The increase follows broad stock market gains: Since the beginning of the fourth quarter, the Dow is up 5%, the Nasdaq is ahead 8%, and the S&P 500 has tacked on 5%. With a better overall market, venture capitalists have been able to exit positions.

Until recently, VCs had been relegated to the IPO sidelines. There were only two venture-backed deals in the first half of the year, according to Thomson Financial. During that time, more established companies were going public, as investors very cautiously got back into the game.

Even now, experts say the uptick in venture offerings is modest. "VCs have been able to unwind some investments successfully. This has provided relief as they start to do fundraising," said Jesse Reyes, vice president of Thomson Venture Economics. "But it is hard to say this is a roaring comeback."

Volume aside, many of the recent venture offerings have been unsuccessful. Biotechs Acusphere(ACUS), Advancis(AVNC), CancerVax(CNVX), Genitope(GTOP), and Myogen(MYOG) all had VC money behind them, but the stocks are down an average of 7% since their debuts in October.

"Biotech is a magnet for venture money," said David Menlow, an analyst at IPOFinancial.com. "But investors do not want deals from that sector. They are focused on profitability."