IPO pipeline full, few pricings in Q3

Venture-backed IPOs got off to a good start earlier this year. But offerings have become so rare in recent weeks that they seem almost an endangered species. Throughout September, just one VC-funded company, health care billing services provider AthenaHealth Inc. (Nasdaq: ATHN), made it to market. The company raised a $133 million IPO.

The slowdown is similar to what happened last year. In the third-quarter of 2007, 12 VC-backed companies launched IPOs, raising about $950 million in proceeds. That was the slowest three-month period since the third quarter of 2006 when seven VC-backed IPOs raised about $664 million.

Still, this summer’s slowdown has only slightly cooled a hot IPO market. A preliminary count shows that 55 VC-backed companies have gone public in the first nine months of the year, raising about $7.3 billion in proceeds, compared to 34 IPOs raising about $2.7 billion in the same nine-month period the year before. (Thomson Financial and the National Venture Capital Association are expected to release a more definitive Exit Poll this week that takes a look at Q3 M&A and IPO activity.)

October is already looking better, judging from the volume of new filings in recent weeks. A full pipeline of technology, life science and Internet companies is seeking to launch ambitious IPOs. A dozen funded companies have filed to go public in September, heavily weighted to technology and medicine. The broader market’s recovery from August lows, juiced by a half-point interest cut, could also provide a more receptive climate for these and many more new offerings.

“The fall is shaping up to be a humdinger,” says John E. Fitzgibbon Jr., founder of new issues market tracking site IPOScoop.com, pointing to the number of pending IPOs. “All you have to do is be patient.”

Venture backers stand to gain some of the biggest proceeds from the newest IPO candidates. These include Emphasys Medical, a developer of emphysema therapy, Elixir Pharmaceuticals, which makes drugs for metabolic diseases, and Mako Surgical Corp., which makes equipment for osteoarthritis surgery. Each has filed to raise about $83 million.

Eight venture backers collectively own 85% of the Emphasys, with Advanced Technology Ventures holding the largest stake in the company, which raised about $80 million in funding from ATV and other investors. Arch Ventures, MPM Capital and Oxford Bioscience Partners own more than half of the shares in Elixir, which raised more than $80 million in funding. And Aperture Capital, Lumira Capital (f.k.a. MDS Capital), Tudor Investment and Sycamore Ventures own about 40% of Mako, which has raised more than $50 million.

Tech companies are also planning to make the leap to the public market in the next three months. September IPO filers in this category include ArcSite, a security software company; Aprimo, a developer of customer relationship management programs; and BlueArc, which develops magnetic disc storage technology.

Private equity-backed companies account for the biggest IPOs in the pipeline. One of the largest September IPO filings is from Cardtronics, the operator of a large ATM network that is looking to raise $300 million in its IPO. It raised about $90 million in funding in 2001 and 2005 from TA Associates and CapStreet Group.

Beijing-based China Digital TV Holding Co., which is 21%-owned by SAIF Partners, is planning a $150 million offering of American Depository Shares. The company, which develops digital TC technology, raised $5 million from SAIF in 2004.