Venture capitalists (VCs) are supposed to take the long view of things. Even fast-growing companies like Cisco (NASDAQ: CSCO) and Google (NASDAQ: GOOG) can take awhile to get traction. Of course, it's worth the wait as the returns can be staggering.
But there's now a big problem for VCs: even if their portfolio companies are doing well, there are few opportunities to cash out. Simply put, the key exit markets – IPOs and mergers & acquisitions – are in deep freeze.
Just take a look at the latest statistics from Dow Jones VentureSource. For Q3, VCs got only $4.75 billion in exits from IPOs and M&A deals. This represents a 66% plunge from the same period a year ago.
Interestingly enough, the only VC-backed company to go public in Q3 was Rackspace Hosting (NASDAQ: RAX), and this deal was fairly lackluster.
In fact, at the current pace, it appears that this year will be the worst for IPOs and M&A deals – that is, since the dot-com bust.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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