Venture capital funds lose 21% in '08
- |
NEW YORK - Venture-capital funds lost 21 percent of their value last year as a closed market for initial public offerings kept young companies from delivering returns for early investors.
Almost the entire decline came in the fourth quarter, after the bankruptcy of Lehman Brothers Holdings Inc. roiled financial markets, the National Venture Capital Association said yesterday. The association's performance index fell 19 percent from Oct. 1 to Dec. 31.
Falling stock prices made it more difficult for start-ups to sell shares or merge with larger competitors. Last year, the number of IPOs by start-ups fell to the lowest level since 1977, as the Standard & Poor's 500 index lost 38 percent.
"The down economy and a preponderance of later-stage companies did it," said John Taylor, the association's research vice president. Later-stage firms are usually older and closer to going public or being sold, making them more vulnerable to market swings, he said.
Venture capitalists buy stakes in small, private companies in industries such as technology or clean energy, and make their returns when they take the companies public or sell them to larger operations.
Last year, only six venture-backed firms went public. No such businesses staged IPOs between August and this month, the longest stretch without a start-up deal since at least 1971.
