Notes from the IBF Venture Conference

I recently attended the IBF Venture Conference at the Palace Hotel in San Francisco where there was enough information on the global technology markets to sink a battleship and one overarching theme:

Global, Global, Global.


Wow! I can't say I had no idea, but the numbers I saw were more staggering than I'd expected.

Here are the numbers for venture investment growth in mature markets in 2007 (B):

• United States grew from $US 27.7 to $US 29.9 (8%)
• Europe grew from €4.5 to €4.6 (2%)

In comparison,

• China grew from $US 1.8 to $US 3.2 (83%) and
• India grew from $US 0.3 to $US 0.9 (195%)

The good news for US companies is that the US remains far and away the largest market for invested venture capital.

The bad news is that as it stands it is much harder for equity holders to find liquidity. Venture backed tech IPOs which were having a nice run: 11 in 2003, 40 in 2004, 27 in 2005, 25 in 2006 and 47 in 2007 look completely stagnant in 2008 (crossing our fingers for one, so far). The median time from initial equity funding to IPO nearly doubling from 4.5 years in 2001 to 8.3 in 2008.

Also both M&A and LBO activity are off significantly in 2008 despite corporate cash balances remaining at an all-time high.

One of the reasons for the significant fallout of the US IPO market is the adoption of the Sarbanes-Oxley Act. One of the panelists said that they don't even think about taking a company public if it's got less than $300M in revenue, maybe a bit extreme, but as Dwight Badger of Advanced Equities artfully put it, the $50-$80M IPO is on constant life support.

IPOs are diversifying around the globe. From 1997 through 2007, as a percentage of global IPO proceeds, the US declined from just under 60% to just under 20%. Japan, China and India all experienced moderate growth while the category of Other expanded from 20% to 40%.

So much for globalization... As Zakaria points out in The Post American World, we promoted capitalism and capital markets around the world and damned if they didn't listen. It's less about us falling as it is about "the rise of the rest" and we've got a lot of work to do, policy-wise and otherwise to keep the pace...

Next post: VC investment trends