Venture-backed IPOs shoot up in first quarter

In a sign the U.S. economy continues to recover, a steady procession of companies are going public.

According to a new poll report by Thomson Reuters and the National Venture Capital Association (NVCA), there were 36 venture-backed initial public offerings during the first three months of the year, a 50 percent increase in new listings compared to the previous quarter. Of those offerings, which raised $3.3 billion, 24 were biotechnology companies.

"Building on the momentum of 2013, the venture-backed exit market is continuing to flourish in 2014," Bobby Franklin, President and CEO of NVCA, said in a statement. "We are encouraged to see life sciences companies experience a period of revival in the public markets."

The first quarter was also the fourth straight with 20 or more venture-backed IPOs, and reportedly the strongest quarter for new listings in nearly 14 years.

The report also notes that 35 of the 36 IPOs during the quarter involved U.S.-based companies, the largest being Castlight Health (CSLT), a healthcare software company headquartered in San Francisco. Castlight raised $204.2 million and began trading on the NYSE on March 13.

Why is this data a good sign for the overall economy? Analysts point to the new jobs and industries venture-backed IPOs often create.

"Venture-capital backed start-ups have been a major force for technological innovation and industry disruption over the last 40 years," the managing consulting firm Accenture noted in a research report last year. "Without VCs, we wouldn't have Apple, Google, Intel, Microsoft, Genentech or Oracle."

A 2012 annual report by Ernst & Young also noted "the invigorating effect venture capitalists have on entrepreneurship in the U.S.," and that "IPOs of venture capital-backed companies on U.S. exchanges outperform the IPO market in general."

  • Bruce Kennedy

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