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Jul

2011

5 IPO Facts for 2011 PDF Print E-mail

Emily Mendell

Written by Emily Mendell   
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Today marks the beginning of our venture capital data release season for Q2 2011 with the release of Exit Poll.  This report, which NVCA releases with our partner Thomson Reuters, measures venture-backed IPOs and M&As.  You can read the press release here.

The data suggests that the IPO market is continuing to improve in terms of volume with 22 offerings this quarter.  On the flip side, the acquisitions volume declined this quarter to 79 transactions from an all-time high in Q1 of 123.  Still, the acquisitions volume remains within range of historical norms.

The IPO data suggests that we will see a moderate improvement over 2010, but nothing outrageous or “bubble-like.  If the second half of 2011 is equal to the first, we will end the year with 72 IPOs – which would be a decline from last year’s 74 offerings.  And not all of these companies are based in the United States.  We count in our data set all global companies that go public on a U.S. exchange and have at least one US venture investor.

Some interesting fast facts about the first half of the year in venture-backed IPOs:

Of the 36 IPOs in 2011:

  • 24 were U.S. companies; 8 from China;  and 1 each from Canada, France, Netherlands and Russia
  • 15 companies went public on the NYSE; 21 on NASDAQ
  • There are currently 46 venture-backed U.S. companies in registration with the SEC.
  • Of the 22 IPOs in Q2, 15 were trading at or above their offering price yesterday.
  • There were 8 firms that have had 3 or more IPOs this year:  Goldman Sachs (4), Redpoint Ventures (4), Meritech Capital Partners (3), Sequoia Capital (3), GGV Capital (3), Greylock Partners (3), Accel Partners (3), and New Enterprise Associates (3). Twenty five firms have had two IPOs this year.

While the quarter signaled increasing stability, we still need IPO volumes to increase and remain in the 25 offering range for US companies to consider a recovery. Given the uncertainty around the debt ceiling, the instability of foreign economies, these levels will likely be elusive in 2011, but we are a far ways from the drought of 2008-09 and headed in the right direction. 

Stay tuned for more venture data this month – VC fundraising, investments and performance coming your way in the coming weeks.  Happy 4th of July to all!

Last Updated on Wednesday, 06 July 2011 11:02
 

27

Jun

2011

Patent Reform Bill Passes House PDF Print E-mail

Kelly Sloane

Written by Kelly Slone   
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On June 23, the U.S. House of Representatives approved H.R. 1249, the America Invents Act of 2011, by a vote of 304-117.  The bill included a change to the provision the would ban the diversion fees to the USPTO.  The change effectively allowed the status quo to remain, i.e., forcing the USPTO to go back through the appropriations process to seek access to funds.  Banning fee diversion was one of the most favorable provisions in H.R. 1249 from the perspective of most stakeholders including NVCA.  This change is also a huge departure from the Senate passed bill, S. 23.  Because of this change, NVCA did not support H.R. 1249.

A new provision that would expand the prior user rights statute was also included in the final bill.  Given the change to a first-to-file system, there were concerns that the first inventor might have had various reason not to file a patent application and may have already commercialized the invention.  This new provision would apply to any technology. However, it would generally not allow the defense against patents owned by institutions of higher education. NVCA supported an expansion of prior user rights and believes it is an integral component of any new paradigm if the U.S. patent system changes to a “first to file” system.

Unfortunately, there were no changes made to the post-grant review provisions.  NVCA voiced concern that the lower estoppels standard for post-grant review in the first window does not provide the adequate safeguards to deter larger companies from using PGR as a mechanism to harass small companies.

Senator Leahy, the Senate sponsor of S. 23 which passed the Senate in March, applauded the House action on H.R. 1249 and indicated that he will make an effort to move quickly and push the Senate to pass H.R. 1249 even though there are differences between the Senate and House bills. 

The NVCA will continue to advocate for our major issues on this legislation but the further along in the process, the less likely changes to the bill will be made.

 

Last Updated on Wednesday, 06 July 2011 11:05
 

22

Jun

2011

NVCA Cautiously Optimistic On SEC Definition of VC PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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Today the Securities and Exchange Commission (SEC) held a meeting in which they provided an overview of the final ruling on the definition of venture capital for the purposes of exemption from SEC registration. 

As readers recall, the NVCA specifically advocated for this exemption as Congress was crafting what would become the Dodd Frank Act.  Agreeing that venture capital investment did not pose a systemic financial risk, lawmakers instructed the SEC to define a venture fund and those funds that fall within the definition would not have to register as an investment advisor.

In November of 2010, the SEC issued its first proposal on defining venture capital to which the NVCA responded with a detailed comment letter and encouraged our members to do the same.  The focus of our comments was to expand the definition so that the majority of NVCA member firms would be covered under the definition.  Specifically we requested that funds be permitted to engage in activities which fall outside the definition of venture up to 15 percent of the total fund dollars.  We also requested certain investment activities be permitted under the exemption requirements.

Today’s overview revealed that the SEC will allow for a 20 percent (of committed capital) basket of investment activity outside the ruling.  In this regard, we are pleased to see that the SEC recognized the need for flexibility in defining venture capital.  However, there are details of the ruling that have yet to be shared, including any adoption of the NVCA recommendations for allowable activities for qualifying firms.  We will wait for those details before issuing a full response and analysis for members, which should be forthcoming within the week.

We also appreciated the comments from certain commissioners who expressed concern that the reporting requirements for all venture funds could become onerous over time.  It is our hope that this reality will not come to pass.  The SEC will reassess the reporting requirements in one year's time and during this period the NVCA, too, will be staying in close touch with members so that we can weigh in as needed. 

In the last year, the NVCA has faced and addressed two major issues that threatened the venture industry – carried interest taxation and the SEC definition of venture capital.  We are positioned very well in maintaining the current tax treatment of carried interest and are cautiously optimistic that the forthcoming definition of venture capital will be workable for the vast majority of our membership.  On behalf of the staff and the NVCA Board, we thank our members for their support, especially those members who submitted comment letters to the SEC on the definition issue.  Our collective voice has made a difference. 

 We look forward to communicating further on this issue in the coming days as more details on the ruling are made public.

Last Updated on Wednesday, 22 June 2011 13:57
 

21

Jun

2011

Stronger IPO Activity Needed, Says Global Survey PDF Print E-mail

Mark Heesen

Written by Mark Heesen   
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Today the NVCA and Deloitte issued the results of our 2011 Global Venture Capital Survey which focused on the attitudes and opinions of venture capitalists around the world regarding the capital markets.  Not surprisingly, 80 percent of the respondents believe that the current level of IPO activity is too low to support the health of the venture capital industry.  The respondents were also clear in their assessment that a more robust IPO market is critical to provide superior returns to limited partners.  The results may seem at odds with recent IPO activity and the endless chatter about the next venture capital bubble.  But most of what is happening in the market today is more buzz and less substance - making today's survey results hold water, especially here in the United States.  You can view a full slide deck here.

Thus far in 2011, there have been 34 IPOs compared to 27 in the first half of 2010 - an improvement but not much of one.  And if you consider the number of U.S. companies (as opposed to foreign companies going public on US exchanges) fewer have gone public this year (22) than last year at this time (23).  All of this compares to the first half of 1997 when 53 companies went public.  This level is one which our industry should strive to achieve. 

Currently, there is a great deal of hype around a handful of companies considering the public markets -- or the secondary markets for that matter.  Still, what is true for those companies is not necessarily true for all companies.  In order for our capital markets to fully recover, the window must be open and the appetite strong for the high profile companies and the low profile -- but still strong -- companies as well.  In fact, "investor appetite" was cited as most often as the most important driver of a strong capital markets system.  This is one driver that is harder to influence but hopefully the markets will continue to improve and a strong appetite will return.

 

 

Last Updated on Wednesday, 06 July 2011 11:07
 

19

Jun

2011

NVCA Comments on House Patent Bill PDF Print E-mail

Kelly Sloane

Written by Kelly Slone   
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Last week, the NVCA sent a letter to the House Judiciary Committee Chairman Smith (TX) and Ranking Member Conyers (MI) on H.R. 1249, The America Invests Act.  The letter focused on three provisions included in H.R. 1249. 

1) NVCA expressed strong support for Section 22 that would end fee diversion from the USPTO.  Section 22 would help modernize the U.S. patent system and provide the USPTO with the needed resources to improve the quality of the patent application process. 

2) NVCA also voiced support for the expansion of prior user rights that include the appropriate safeguards for university research involved in federal funding.  NVCA believes prior user rights are an integral component of any new paradigm if the U.S. patent system changes to a “first to file” system.

3) Lastly, we expressed concern that the lower etsoppel standard for post-grant review (PGR) does not provide adequate safeguards to deter large companies from using PGR as a mechanism to harass small companies.  Under the first window PGR in H.R. 1249, subsequent court and ITC cases are subject to weak estoppels precluding re-litigation only on the grounds actually raised during the PGR.  NVCA believes this conflicts with the primary goal of PGR, which is to move as many patent challenges as possible out of the courts.  Permitting a challenger to raise only one issue in PGR and ‘reserve’ all the rest for litigation seems to open the door for abuse. 

Without changes to the PGR, the NVCA will not support H.R. 1249 which is expected to go to the floor for a vote this week. The Senate passed its version, S. 23 in April -- we did not support that bill for similar reasons.  We will be watching the House this week for developments.   

 

15

Jun

2011

ARPA-E Update: NVCA Seeks Signers for Support Letter PDF Print E-mail

Emily Baker

Written by Emily Baker   
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NVCA has long advocated for expanded federal funding for clean energy research. One of the best examples of a federal program successfully conducting critical, early stage basic research is ARPA-E.  The Advanced Research Projects Agency – Energy (ARPA-E) is modeled after the successful DARPA program.  ARPA-E was part of the America COMPETES Act enacted in 2007 and, since that time, it has always struggled for funding dollars.  Its mission to solve the nation’s energy challenges by funding disruptive, new energy technologies is critical to ongoing US competitiveness and economic growth.  Since 2009, ARPA-E has awarded $363 million in projects, and is currently funding more than 120 projects. At least six of these projects have leveraged $23.6 million in federal funding into more than $100 million in private capital investment.

Recently, the House Energy and Water Subcommittee appropriated a dismal $100 million for the program.  Last night, NVCA got word that Congressman Adam Schiff (D-CA), an Appropriations Committee member, was going to offer an amendment at the committee mark-up today to fund ARPA-E at the FY 11 funding level of $180 million.  Working with universities and others, we quickly put together a letter of support for Representative Schiff’s amendment.  The result was a letter signed by approximately 50 organizations.  Despite our effort, Schiff’s amendment failed by a voice vote in the Committee this morning.

However, we will continue to get signatures on this letter for a possible amendment when the bill reaches the House floor.  This show of support is extremely important as the Senate is still waiting to act on the Energy and Water appropriations bill.  Having this letter of support will help lay the foundation for negotiations during any House-Senate conference committee on the funding legislation.

If you’d like to add your name to the ARPA-E letter, please email me at ebaker@nvca.org as soon as possible.

 

 
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