This paper investigates the actual performance of 2,678 Initial Public Offerings (IPOs) of companies that were backed by venture capital from 1969 to 2002. The main purpose is to compare the annual returns of the venture capital industry during the 1980s and 1990s. Comparisons between the decades provide some reasoning for the increased media coverage of the industry. There is no doubt that the media is fascinated by the release of any good news concerned with venture capital. For example, many people are familiar with the recent venture-backed Initial Public Offering (IPO) of Google, which brought in $1.7 billion on its opening day in August 2004. The shares of Google have risen by almost 50 percent since then (Wall Street Journal, October 1, 2004, Page C15). One hears much less about companies such as Nanosys Inc. or PlanOut Inc., which postponed their IPOs, citing uncertain market conditions. Nowadays, one often hears about the biotechnology sector that draws big bucks as financial analysts refer to this sector. Recent examples include Avera Pharmaceuticals Inc., a developer and licensor of treatments for neurological and psychiatric disorders who raised $48 million in a third round of financing, or Sophrion Therapeutics inc., a maker of oncology, asthma and allergy drugs who raised $47 million in a second round. Achievements in the telecommunication sector are also widely publicized, recent examples of which include ABS Capital leading a $23 million round of investment in ControlPoint Solutions Inc., a company whose products target telecommunications cost-management problems, and BridgePort Networks Inc., a manufacturer of products that link mobile and internet telephone calls who raised $25 million in a second round.

JEL Codes

G24, M13


Venture Capital, Venture-backed, Public