IPO activity in U.S too low, says VCs

IPO activity in U.S too low, says VCs

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IPO activity in U.S too low, says VCs
Fremont: The echelon of IPO activity worldwide is at a low state, creating difficulty for the venture capital industry to sustain. A report from 2011 Global Venture Capital Survey states that more than 80 percent of the surveyed VCs said that the current IPO activity levels in their home countries are not sufficient to support the health of the market. 87 percent of the U.S. venture capitalists surveyed deem that the current level of IPO activity is too low in their country.

VCs find this slow down as a matter of concern for their industry. There is an increase of 27 percent over last June with 75 companies going IPO in the current year in U.S., of which 29 are technology sector companies. With a decent rate of companies going IPO this year, the survey comes with a large caution. 91 percent of the U.S. VCs say that the domestic IPO market is a critical element of the venture capital industry.

With NASDAQ, New York Stock Exchange and Shanghai Stock Exchange being selected as the three most promising stock exchanges for venture-blocked IPOs, most VCs deem that the companies registered under these stock exchanges will provide a healthy and vibrant market for their growth. This slow down in the IPO sector can be narrowed to several factors, such as the economy slow-down during 2007-08, which resulted in the closure of many establishes companies and resulted in an uncertain market.

VCs started funding new companies rather than investing more on the existing one, as they were in a slow-down. Other factors are the lack of competitive investment banking community that can help these companies go IPO, lack of freely available capital and lack of interest for equity in public companies. The companies who do not have the ability to go public are either being abandoned and acquired or have to be wind up due to loss.

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