Like stunned Arkansas residents trying to clean up after one of the worst ice storms anyone there has ever seen, venture capitalists have entered 2001 looking to pick up the pieces from a year marred by continuous deterioration. Most importantly, early-stage and late-stage investors alike are hard at work trying to unclog public exit pipelines that had been freely flowing during the first quarter of 2000, only to jam up almost completely over the year?s final few months.
What is important to remember, however, is that current hardships are not necessarily indicative of the venture-backed IPO market?s overall performance in 2000. While the final figures were unable to duplicate 1999?s record volume, 238 venture-backed companies did manage to successfully execute on their IPO plans last year, pulling in a total of $22.853 billion, according to Private Equity Week publisher Venture Economics. Last year, 271 companies managed to bring home $23.6 billion
Topping the List
Leading the way last year was Corvis Corp., an optical networking company whose July 27 IPO scored $1.138 billion. The stock was initially offered at $36, and managed to rise up to $114.17 until really dropping back down to earth during the fourth quarter. Despite the public market upturn yesterday, Corvis stock is currently mired at around $20 per share. Among the firm?s venture backers were Arete Corp., Cisco Systems, Kleiner Perkins Caufield & Byers, Kinetic Ventures, Merrill Lynch Investment Management, New Enterprise Associates and Worldview Technology Partners.
Other big winners included energy provider TNPC Inc., which raised $504 million on October 4, and cable television and digital communications provider Mediacom Communications Corp., which raised $380 million back on February 3. Rounding out the top ten were Transmeta Corp., Oplink Communications Inc., StorageNetworks Inc., Equinix Inc., Cosine Communications Inc., Lexicon Genetics Inc.> and Avici Systems Inc.
“Overall, it wasn?t a terrible year [for venture-backed IPOs],” said Tom Furlong, managing director with Granite Ventures, which helped 13 of its venture portfolio companies go public in 2000. “It was divided up a lot in terms of different outlooks at the beginning and end of the year, but a lot of good companies managed to get out there.”
Indeed, the gradual closing of the IPO window did not prevent scores of private equity firms from unloading some of their portfolio into the public market. Chase H&Q, for example, took top honors as 30 of its portfolio companies executed on public exit strategies in 2000. It is important to note, however, that the Chase H&Q total includes both HomeGrocer.com and Blaze Software, both of which held IPOs and were delisted in 2000. In all, five venture-backed companies that went public last year also got delisted due to low stock prices or acquisition, including Quantum Effect Devices, Arrowpoint Communications and Nogatech.
In second place for companies put public was Goldman, Sachs & Co., which brought 20 companies out, including the aforementioned Arrowpoint Communications. It also led the league tables in terms of how much aggregate capital its portfolio companies were able to raise, with $2.383 billion. Kleiner Perkins came in second with $2.373 billion and Chase Capital Partners rounded out the top three with $2.314 billion.
“We were careful in how and when we did transactions,” said Kathleen Baum, spokesperson for Goldman Sachs. “The companies themselves were attractive to us as investors and to the marketplace. That was key.”
In general, the marketplace preferred technology plays over all else, as 38e-commerce and online content plays received $3.297 billion and 43 computer software firms landed a total of $2.857 billion. The communications and biotechnology sectors were also especially popular.
For communications it was a great year,” said Chris DePuy, general partner with Bowman Capital, which put 10 portfolio companies out into the public market. “For software it was a challenging but okay year, because only the A+ ones got out. As for dotcoms, the first two months were great but there was nothing after that.”
For more on this story, including detailed charts, check out Monday’s print edition of Private Equity Week.