In this morning’s Exit Poll release by the NVCA and Thomson Reuters, we were deliberate in making the point that despite the Q4 momentum, the venture-backed IPO market did not recover in 2011. In fact, it still has quite a way to go before we declare a healthy IPO market.  Here at NVCA, we are focused on the NUMBER of offerings rather than the total offer amount as our country needs MORE public companies – not necessarily bigger ones. 

Aside from the need for more IPO volume, here are a few other trends that 2011 data suggests:

Bulge Bracket Banks Still Dominate:  Morgan Stanley served as the book manager or co-manager for the most venture-backed IPOs in 2011 at 17 followed by Goldman Sachs and JP Morgan (14 each), BofA Merrill Lynch (11), and Barclays Capital, Citi and Deutsche Bank (10).  Boutique banks had a smaller showing with 1 or 2 IPOs apiece.

Continued Competition Among the Exchanges:  The NVCA views competition among the exchanges as a positive and 2011 did not disappoint. The NYSE listed 33 percent of the offerings in 2011 including Renren, Kosmos Energy and LinkedIn.  This compares to 36 percent of the listings in 2010 but 12 percent in 2007.  NASDAQs biggest offerings of the year were Yandex, Zynga, GroupOn and HomeAway. 

Foreign IPOs Still a Presence, Though Less So than in 2010:  The largest IPO of the year was Russian company Yandex, at $1.3 billion followed by U.S.-based Zynga at $1 billion.  Foreign IPOs accounted for one quarter of the 2011 listings compared with 37 percent of the listing in 2010.  The drop in percentage was driven by fewer Chinese companies listing this year (9) versus last year (25).

Domestic IPOs Bring Economic Promise to Regions:  Domestically, the most IPOs came from California-based companies with 21 followed by Illinois, Texas and Massachusetts (3 each), and Indiana and Colorado (2 each).  Other states that had an IPO were Connecticut, Washington, Iowa, New Jersey and Utah.  It can’t be stressed enough how important these IPOs are to a region’s economy.

Promise Abounds for 2012:  The pipeline is full with 60 venture-backed companies cuurently in registration.  If all of these companies actually go out we will need another 40 or more to join them to declare a strong IPO year for 2012.

For more IPO data and information, feel free to contact NVCA.

Comprehensive immigration reform may be bogged down in election year politics, but the issue of high skilled immigration is making some headway in Congress.  In late November, the House of Representatives passed a bill (by an overwhelming margin of 389-15) sponsored by Rep. Jason Chaffetz (R-UT) entitled the Fairness for High-Skilled Immigrants Act (HR 3012). The legislation would eliminate the per country numerical limitation for employment-based Visas and increase the per country numerical limitation for family-based immigrants from 7% to 15% of the total number of family-sponsored visas. The family-based Visa provision is important because often an entrepreneur is able to get a Visa, but it is difficult for his or her family to come to the U.S., so this measure would loosen the ability for that family to relocate together.  The measure is awaiting action in the Senate.

In other immigration news, Reps. Adam Schiff (D-CA) and Charlie Bass (R-NH) recently introduced legislation that would help foreign born students with STEM degrees from U.S. universities to remain here to start a business.  Their bill, the INVEST Act (HR 3692), would create as new Visa category that would grant permanent residency to an immigrant entrepreneur who starts a new business, creates two new jobs or invests $200,000 after two years; and creates five jobs or invests $500,000 in the business within five years. According to Reps. Schiff and Bass:

“The INVEST Act will allow highly skilled entrepreneurs the opportunity to build the next great company and to do it in America. Our universities are educating the next generation of Steve Jobs – we want to make sure they build the next Apple in the United States and not overseas.”

NVCA has issued its comment letter to the Financial Accounting Foundation on FAF’s draft plan to make private company financial reporting standards more relevant and useful. NVCA supports the overall plan and makes suggestions for improvements in governance, accountability, and structure. The draft plan issued in early October, is in response to the recommendations of the Blue Ribbon Panel (BRP) created by FAF over a year ago.  The BRP made a number of recommendations for bringing more focused attention to the specific needs of private companies which are often quite different from those of the stakeholders in public companies.

NVCA believes that the current one-size-fits-all approach to accounting principles, standards, and disclosures results in significantly added costs and efforts for its member firms and the high-growth, high-promise companies they invest in. Much of the resulting required reporting, established partly for public company investors and creditors, is irrelevant to private company stakeholders.

NVCA and its members plan to speak out on the plan at the roundtables scheduled by FAF.  We look forward to working with FAF leadership as it finalizes the structure and format for the new group.

The Financial Accounting Foundation is the parent organization of the Financial Accounting Standards Board (FASB) which is the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the US Securities and Exchange Commission (SEC).  For more information, please contact me at jstaylor (at) nvca (dot) org.

Last week, the House Judiciary Committee continued to push the controversial Stop Online Piracy Act (SOPA) legislation which despite having the support of the chairman and ranking member of the committee as cosponsors, remains a lightning rod for the rank and file members of Congress.  The SOPA bill is aimed at shutting down foreign “rogue” websites that engage in piracy and counterfeiting, but the legislation would have far reaching negative implications for investors, entrepreneurs and advertisers and payment providers on the Internet. While the goal of the legislation is laudable, the end result of the legislation as currently written could have a chilling impact on innovation.

The committee held a hearing two weeks ago at which only one witness representing the tech community was invited to testify and present their concerns about the legislation.  This issue has garnered tremendous media attention and has both sides, Hollywood/content providers and the tech community, ready for a pitched battle. Chairman Lamar Smith (R-TX) and ranking member John Conyers (D-MI) publicly stated their desire to get a bill passed by the full House by the end of the year and to make that deadline, they scheduled a markup of the bill at which more than 60 amendments were filed.

The markup got off to a slow start when the opposing side objected to the short notice that was given to review changes to the bill and they requested that the bill be read out loud in its entirety by the committee clerk, a process that took hours to complete. Then, opponents of the legislation, like Reps. Zoe Lofgren (D-CA) and Jared Polis (D-CO) pointed out the many flaws in the legislation and they quoted letters and statements from groups opposed to the bill.  Even Republicans on the committee pointed out that there is no reason to rush the legislation through and they expressed a desire to hear from more tech experts about how the bill will change Internet search functions. 

NVCA believes the slowing of the legislative process is a positive development and will allow for critical concerns to be raised and addressed.  Our desire for a more thoughtful process was demonstrated in the letter we submitted last week alongside other tech groups such as TechNet, CEA, Information Technology Industry Council, Silicon Valley Leadership Group and TechAmerica, where we asked policy makers to proceed more deliberately with this complex and potentially very harmful legislation. We also asked them to bring together all the stakeholders so that we can all work collaboratively to end online piracy while not stifling innovation. 

NVCA will stay abreast of this legislation and keep our members informed about the status of the House and Senate bills. We appreciate the outreach that we have received so far from our members and continue to make our concerns about the bill known.

An agreement was reached by the House and Senate on an omnibus appropriations bill to fund the government through September 30, 2012.  The bill conferees released a report which includes 11 individual appropriations bills and cuts overall federal expenditures roughly 1% from last year’s funding levels. The measure will be approved by the Senate and sent to the President tonight to meet the midnight expiration deadline of the current Continuing Resolution.

In the budget deal made between Congressional Republicans and Democrats and expected to go to the President for signature, the Department of Energy in FY 2012, is funded at the level of $25.7 billion down from the previous year’s budget of $26.4 billion.  The good news is that ARPA-E got an increase in funding to $275 million representing an increase from both the House ($180 million) and the Senate ($250 million) numbers.  This is a very signficant increase over last year's funding level of $179.6 million at a time when virtually every other federal program was cut.  

Thanks to all the NVCA members who supported funding for ARPA-E. The funding levle is a clear sign of support by lawmakers for ARPA-E’s Director, Arun Majumdar and the great team he has put together there.

Also of importance to NVCA members, the overall DOE Office of Energy Efficiency and Renewable Energy (EERE) program is funded at $1.8 billion, down slightly from last year’s level.  Other appropriations of note:

• $290 million to existing solar energy research, development and deployment activities;
• $93.35 million to develop advanced offshore wind technologies; 
• $330 million for vehicle technologies, of which $28 million is for vehicle technologies deployment and $3 million is to commission a National Academies study on electric vehicle market barriers;
• $220 million for building technologie that includes $24.3 million for Energy Efficient System Designs Innovation Hub;
• $30 million for the Federal Energy Management Program;
• $26.4 million for the National Renewable Energy Laboratory (NREL)

On related budget issues, we continue to track the debate in Congress on whether to extend the payroll tax, and the House and Senate could return next week to pass an extension.  This is the only other likely action for the Congress this year.