Venture Deals Booming — Right?

Market volatility? Sub prime worries? Not a problem, say Thomson Financial and the National Venture Capital Association. At least that’s what the headline says: “VC Exit Market Not Impacted by Market Volatility and Sub Prime Concerns in 3Q 2007”. Read on, though, and you’ll see that Thomson and the VC trade group are gloomier than the headline indicates.

The release notes that there were 67 venture-backed M&A deals in Q3, and that 34 of them have an aggregate value of $7.7 billion. That’s up 100% from a year ago, when 41 deals totaled $3.8 billion, and it’s the highest average per-deal value since Q4 2000. Obviously, the credit crunch isn’t making its way down to the venture world.  Or is it?

Mark Heesen, who runs the venture trade group, explains that M&A and IPO filing activities were strong in Q3

“However,” he adds, “both exit strategies will be facing challenges over the next several quarters. Anecdotally, we are hearing that acquisitions are taking longer to close as corporations remain cautious in an unpredictable market. Additionally, a growing number of venture-backed companies are trading below their offering prices, signaling potential market weakness. Both these concerns are surmountable but will factor into the health of the overall exit market.”

We don’t want to make too much of this: Heesen is simply relating anecdotal evidence of a slowdown, not a collapse. And, also anecdotally, VC and angel investors tell us that the broader economy is having no impact on their investment activity. But when even boosterish trade groups note that things are looking cloudy, best to have an umbrella handy. Release

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