Jul. 24–Venture capitalists continue to lose money, with the average firm suffering a one-year loss of 29.1 percent through March 31, according to the latest industry data released Wednesday.<\/p>\n
That’s the ninth consecutive quarter of negative returns, marking the longest drought the industry has ever seen.<\/p>\n
However, there are signs of a possible turnaround.<\/p>\n
The public stock market — namely the tech-laden Nasdaq stock market — performed well during the second quarter, rising 21 percent. The venture industry tends to follow the public markets. An uptick in the Nasdaq may coincide with a readiness by investors to accept more initial public offerings, which is the best way for venture capitalists to realize profits on their investments.<\/p>\n
“It’s a cause for optimism,” said Toby Walters, research publications manager at Venture Economics, which released the report Wednesday together with the National Venture Capital Association.<\/p>\n
Over the past two years, most companies incubated by venture capitalists have either died or been sold for pennies on the dollar.<\/p>\n
Venture firms typically invest their funds into start-ups over a 10-year period, and changing market conditions can influence their decisions on whether to write down or mark up a company’s value in the short term. Actual returns are really only known at the end of a fund’s life.<\/p>\n
Still, the once-buoyant industry has taken a steep downturn in the past three years. Venture capital funds lost an average of 17.1 percent in the three years ended in March, marking the industry’s worst 36-month showing ever. By contrast, venture capitalists posted an average three-year gain of 41 percent through March 2002.<\/p>\n
The losses have coincided with a near-total refusal by investors over the past two years to buy stock in tech initial public offerings. However, there are signs of change:<\/p>\n
FormFactor, a Livermore maker of computer-chip testing equipment, went public last month at $14 a share. The shares have since gained 34 percent, closing at $18.80 Wednesday. Fremont DVD software maker InterVideo went public last week, also at $14 a share, and the company’s shares have surged 44 percent, closing at $20.18 Wednesday.<\/p>\n
The Associated Press contributed to this story.<\/p>\n
—–<\/p>\n
To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http:\/\/www.mercurynews.com.<\/p>\n
(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n
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