One telltale sign of the struggling U.S. economy — perhaps less visible than recent bailouts, failures, and stock swoons but no less remarkable — can be seen in the near-absolute dearth of companies going public. Initial public offerings (IPOs) are at an all-time low, according to the U.S. National Venture Capital Association (NVCA). But surprisingly, “the overall health of the venture capital industry is actually pretty good,” NVCA president Mark Heesen reports. NVCA data show that VC performance was positive across all investment horizons during the first quarter of 2008. “The IPO market has now been essentially shut down for venture-backed companies for over seven months. Combined with a skittish M&A market, shorter term performance returns are and will continue to be impacted,” Heesen observes. “That said, our asset class continues to outperform many other investment alternatives including the public markets over the long term. But we will need to see the exit markets improve dramatically to maintain that position in the coming year.” TTO directors at two major institutions confirmed that, so far at least, the recent financial turmoil and the IPO drought have not hurt their office’s performance. “We’ve been doing surprisingly well this year,” says Lita Nelsen, TTO director at the Massachusetts Institute of Technology. “I’ve been very leery of what would happen and cautious [in the current financial climate]. But we are finding surprising interest, still, in starting up new companies in biotech and clean energy. There are the same ratios of venture capital companies funding them as in previous years,” she notes. Joel B. Kirschbaum, PhD, director of University of California-San Francisco’s Office of Technology Management, says his office has also escaped much impact of the markets on the OTM’s activities. “What we saw early on is the impact of venture capitalists moving toward a more risk-friendly type of investment model. Venture capitalists at one point were receptive to investing in technology platform start-ups, but then they migrated to a more risk-averse model which is focused on [closer-to-market] products.” Now, Kirschbaum remarks, VCs seem willing to reconsider technology platforms. But there is one key criterion the VCs are focused on, he adds. “In all cases, the platform needs to be a disruptive one that will make a difference.” A detailed article on the impact of the recent financial crisis on TTO activity, and specific tips and strategies for securing funding even in a sluggish economy, appears in the October issue of Technology Transfer Tactics. For subscription information, CLICK HERE.

Posted October 22nd, 2008 under Tech Transfer

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