Five Venture Backed IPOs Of Second Quarter Best In A Year, But So What

The news from the second quarter might easily be mistaken for good.

Five venture-backed IPOs launched during the three months – the highest total since the first quarter of 2008, when there also were five.

But activity in the market place remains very slow, so slow few companies even bother to file registration papers with the Securities and Exchange Commission.

According to the National Venture Capital Association and Thomson Reuters, there were five venture-backed initial public offerings during the just ended quarter, five information-technology companies and the clean-tech outfit SolarWinds.

While the total was a boost from the first quarter, when there were none, it is no real departure from the sluggish pace of the past year and a half. Since the start of 2008, only 11 venture-backed companies have sold shares on a public market in the U.S., compared with 86 in 2007 and 57 in 2007.

The market in essence has still not recovered from the dot-com implosion - and it is clearly worrisome for the U.S. economy. IPOs allow young companies to raise cash for expansion and in doing so create jobs.

Young companies also are a source of valuable technological innovation.

“We remain concerned about the extremely thin pipeline of companies in registration as it indicates that it will be some time before we can even be in a position to return to healthy IPO activity levels,” said NVCA President Mark Heesen. Only 10 are registered to offer shares.

The danger for the U.S. economy is that exchanges elsewhere begin to fill the shoes of the Nasdaq and other exchanges in the U.S., that have traditionally welcomed startups.

So far they haven’t. But it is probably just a matter of time. In the second quarter, one venture-backed company launched on a foreign exchange: California based Array Networks went public on the Taiwan exchange.