Venture Exits Never Looked So Bad by Scott Austin
Just how difficult has it been for venture capitalists to exit a company since the last tech bust in 2001? Check out some research charts put together by SVB Financial for an answer, and make sure you’re sitting down. Using SVB’s data combined with information from Dow Jones VentureSource, the historical data measures the time and capital it takes to get a venture-backed start-up in a position to go public, be sold or go out of business. The charts, which are broken up by six sectors, don’t draw any conclusions, nor are they entirely surprising, but they do give us an idea of the fundamental problems affecting the venture capital industry. For instance, looking at software companies, the exit multiple - or the value of the company at the time of exit divided by the amount invested in the company - fluctuated between 3.7 and 10.7 between 1994 and 2000. Since 2001, that multiple has ranged from 0.0 to 1.1. Meanwhile, the median time it takes to exit these companies is at an all-time high of 91 months….