1. Emily Mendell, NVCA, 610-359-9609, emendell@nvca.org
Joshua Radler, Thomson Venture Economics, 212-806-3146, Joshua.radler@thomson.com
Venture-Capital Backed IPO Market Slowed in Q1 2005
Venture Industry Monitoring Shifts in Company Exit Strategies
New York, NY- April 1, 2005—Ten venture-backed companies raised $720.7 million through Initial Public
Offerings (IPOs) in the first quarter of 2005, according to Thomson Venture Economics and the National
Venture Capital Association (NVCA). The ten IPOs this quarter mark the lowest level of activity since the
third quarter of 2003, when nine venture-backed companies raised $733 million in the public markets. This
quarter’s IPO total also brings an end to three consecutive quarters of more than twenty IPOs and five
consecutive quarters of over $1.0 billion in total offering size. While historically the first quarter of the
year is the slowest in terms of IPO activity, these lower levels suggest a potential shift in exit strategies
among venture-backed companies.
“One quarter certainly does not constitute a trend but there is evidence to suggest that the hurdles to go
public have been raised from both a regulatory and a market perspective,” said Mark Heesen, president of
the NVCA. “Factors including Sarbanes Oxley compliance, required revenue run rates, and the demand for
larger deals in the public markets have slowed the IPO process, particularly for smaller cap companies in
registration. Fortunately for many of these venture-backed companies, an acquisition remains a compelling
exit strategy, as valuations have been very favorable here. Companies do have choices and, given current
conditions, they may be more likely to go into registration but ultimately choose to be acquired because it is
less burdensome but still produces a handsome return.”
The Technology sector produced the two largest IPOs of the quarter OptionsXpress, Inc. raised $198.0
million and was backed by Summit Partners, while Gravity Company Ltd. raised $108.0 million and was
backed by Hanmi Venture Capital, IONE Venture Capital, and KTB Network. Overall, five Technology
companies raised a total of $469.6 million in the first quarter of 2005.
The Life Sciences sector had five venture-backed IPOs raise a total of $251.0 million in the first quarter.
The largest IPO in the Life Sciences sector was Aspreva Pharmaceuticals Corporation, which raised $79.2
million and was backed by Sprout Group, InterWest Partners, and HBM BioVentures. The second largest
Life Sciences IPO was Favrille, Inc., which raised $42.0 million and was backed by Alloy Ventures, De
Novo Ventures, Forward Ventures, Sanderling Venture Partners, and William Blair Capital Partners.
For the rolling 12 month period ending March 31, 2005, 56% of the companies that went public are
currently trading above their offering price. In addition to the IPOs completed this quarter, there are
currently thirty-eight venture-backed companies “in registration” with the Securities and Exchange
Commission. These companies have filed with the SEC in 2004 or 2005 and are now preparing for their
initial public offerings. This compares with fifty-seven companies in registration at the end of 2004.
“We are seeing the market for venture-backed IPO’s vary from sector to sector,” said Taige Caldwell,
Assistant Research Manager at Thomson Venture Economics. “The high tech sectors are more favorable
now than the life sciences sectors, potentially causing certain companies to wait for a more favorable IPO
exit market.”

2. Analysis of Recent Quarters' IPOs
Total Avg.
Number Total Avg. Venture Venture
of Venture Venture Backed Backed
Venture Backed Backed Post Post
Backed Offering Offering Offering Offering
Quarter Number IPO's in Size Size Value Value
Ending of IPO's the U.S. ($Mill) ($Mill) ($Mill) ($Mill)
3/31/2003 5 1 77.2 77.2 147.8 147.8
6/30/2003 5 2 164.0 82.0 695.3 347.6
9/30/2003 20 9 732.8 81.4 3,064.5 340.5
12/31/2003 52 17 1,048.7 61.7 4,349.9 255.9
3/31/2004 42 13 2,721.1 209.3 10,575.0 813.5
6/30/2004 58 29 2,077.8 71.6 8,930.4 307.9
9/30/2004 64 24 3,225.6 134.4 29,596.8 1,233.2
12/31/2004 82 27 2,990.4 110.8 11,985.4 443.9
3/31/2005 43 10 720.7 72.1 3,077.5 307.8
Thomson Venture Economics & National Venture Capital Association
Q1 Industry Breakdown
Number of
Venture Total Venture
Backed Backed
IPO's in the Offering Size
U.S. ($Mil)
Industry
Internet Specific 3 334.1
Communications/Media 1 70.5
Technology
Computer Software 1 65.0
TOTAL 5 469.6
Biotechnology 4 171.8
Life Sciences Medical/Health 1 79.2
TOTAL 5 251.0
Thomson Venture Economics & National Venture Capital Association
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equity professionals worldwide. Venture Economics offers an unparalleled range of products from
directories to conferences, journals, newsletters, research reports, and the VentureXpert™ database. For
over 40 years, Venture Economics has been tracking the venture capital and buyouts industry. Since 1961,
it has been a recognized source for comprehensive analysis of investment activity and performance of the
private equity industry. Venture Economics maintains a long-standing relationship within the private equity
investment community, in-depth industry knowledge, and proprietary research techniques. Private equity
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The National Venture Capital Association (NVCA) represents approximately 460 venture capital and
private equity firms. NVCA's mission is to foster greater understanding of the importance of venture capital
to the U.S. economy, and support entrepreneurial activity and innovation. According to a 2004 Global
Insight study, venture-backed companies accounted for 10.1 million jobs and $1.8 trillion in revenue in the
United States in 2003. The NVCA represents the public policy interests of the venture capital community,
strives to maintain high professional standards, provides reliable industry data, sponsors professional
development, and facilitates interaction among its members. For more information about the NVCA, please
visit www.nvca.org.