Improving IPO market still not an exit path
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Keywords

IPO
venture capital
M&A

Abstract

Recent suggestions that improving IPO activity will lead biotech venture investors to lucrative exits seems to be a bit premature and detached from the reality of these deals. The maxim oft repeated by venture investors has never been truer: IPOs are financing events, not liquidity events. Venture-backed biotechs that are going public are doing so with substantial participation from their venture investors as well as other insiders. This trend is increasing. What’s troubling in all of this is that not only are venture investors not replenishing their war chests through IPOs, they are emptying them because public market investors are unwilling to take on the role of funding the public debuts of these companies without the participation of the venture investors. That means IPOs are failing to generate the returns venture investors need to reinvest in promising new innovative companies. It’s also directing large sums of capital from investors who have traditionally funded early-stage companies into later stage deals where investors see less risk and a faster path to desired returns.

https://doi.org/10.5912/jcb593
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