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IPO Market Shows Strength in Q3

After an extended dry spell, the venture-backed IPO market is showing signs of life. Nine venture-funded companies raised some $732.8 million in the third quarter of this year as they entered the public markets for the first time, according to new data from Thomson Venture Economics and the National Venture Capital Association.

This is an important indicator, because one of the biggest things that keeps startups from getting funded is the lack of a clear exit strategy. Though venture capitalists are paid to take risks, they want to see some relatively clear path for them to make back around ten times their investment in a matter of a few years. And when a sector doesn't look good, they get out completely (see Corning Sells VC Unit). However, an increase in mergers and acquisitions, along with a healthy IPO market, makes it easier for startups seeking funding to stay in business (see Is Startup M&A on the Rebound?).

There were a handful of telecom-related companies completing IPOs last quarter. SigmaTel Inc. (Nasdaq: SGTL), which makes chips for cell phones and other devices, raised $150 million while Netgear Inc. (Nasdaq: NTGR), a networking equipment maker, and iPass Inc. (Nasdaq: IPAS), a wireless remote access provider, hauled in $98 million each (see Netgear Shares Soar After IPO).

What's the impetus here? It could be several things. For one thing, investors may feel that a lot of private company valuations have corrected themselves way beyond what was artificially added during the Internet bubble. The major stock indexes also seem to be well on their way to recovery.

"The strong performance of the Nasdaq over the past few months is definitely contributing to the increasing numbers of venture-backed companies looking to do an IPO in the near future," says Jeanne Metzger, VP of business development and public affairs for the NVCA. To Ms. Metzger's point, the Nasdaq Composite Index has climbed in value more than 30 percent since the beginning of this year. Still, the big-box telecom equipment vendors -- both the wireline and wireless variety -- aren't in the clear. The venture-backed startups that have gone public so far this year haven't been solely dependent on the capital spending plans of big carriers. The same can't be said for several startups, including Valo Systems and Metro-Optix, which couldn't raise the cash needed to get into a big carrier network (see Copper Access Startups Tarnished and Xtera Nabs Metro-Optix Assets). The NVCA reports that there are 35 venture-backed companies that are now in registration to go public. Of these, however, the sole telecom industry concern is Evercom Systems, which provides phone services to correctional facilities. — Phil Harvey, Senior Editor, Light Reading

BobbyMax 12/4/2012 | 11:22:15 PM
re: IPO Market Shows Strength in Q3 First of all if a company goes public, it does not assure its long term survival. Many times IPOs do not have a good grasp on technology to make multiple products. This is the time these companies whither away. The death of many companies that had raised $140 million to $275 million offers a clear proff that a bunch of money is not going to save them.

When many stocks lost closed 90% of their value and any increase in stock value may not be permanent. There is no strength in the economy.

As far as the telecom market is concerned, it is lost forever and it may not recover in the next 25 years.

Any investment on wall street are being made by the institutional investors as they do not care how much money their clients lose. Wallstrret is as lose as it was in the year 2000.
gea 12/4/2012 | 11:22:12 PM
re: IPO Market Shows Strength in Q3 BobbyMax:

All your base are belong to us.
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