BigBand Networks, founded at the height of the bubble in 1999, went public in March. They are one of the few companies initially funded in 1999-2000 to ever go public. This has prompted speculation by some VC firms that other bubble children might make it over the line.
Venture firms backed 4,757 companies during the hectic years of 1999 and 2000 but only 128 of them, or 2.7 percent, have staged an initial public offering, according to Dow Jones VentureOne.
Nearly 38 percent of the companies that got their first venture capital in those years went out of business, but not before getting a total of $35.6 billion in equity. Another 30 percent have been acquired, some for attractive prices but many for less than the amount VCs committed.
But that still leaves plenty of bubble survivors in venture firms’ portfolios – a total of 1,422 as of late April, according to VentureOne. These 1,422 companies have received a total of about $50 billion in venture capital and employ more than 150,000 people. Moreover, one-third of them are profitable.
M&A will remain the chief exit for venture investors. Even a robust public market won’t be able to absorb all VCs have to offer. Last year, 416 venture-backed companies were acquired, while 56 went public.
But the clock is ticking for the bubble survivors. Venture funds are typically 10-year affairs, and investors will be looking for ways to exit from companies they backed seven or eight years ago. Companies that can’t go public or find a suitable corporate acquirer might wind up getting sold to other private equity firms, although examples of this so far are limited.