M&A, IPO activity improves for venture-backed companies

Venture capital companies are expecting heftier returns in 2011, expecting that businesses they've invested in are finally ripe enough to be sold off. Already, 2010 marked the best year nationwide since 1985 for the number of mergers and acquisitions involving businesses that have received venture capital, according to records by Thomson Reuters and the National Venture Capital Association. "The record acquisition level illustrates a recognition by larger corporations that there is considerable innovation within these venture-based companies, while (venture capital companies) and founders are acknowledging the acquisition as the smoother exit," said Mark Heesen, president of the National Venture Capital Association. The number of initial public offerings by companies receiving venture capital investment has risen to its largest number since 2007, according to Thomson Reuters and the NCVA. During the recession, mergers and acquisitions slowed down, making it difficult for venture capital firms to exit their current investments and put in money in new businesses. But a slow economic recovery seems to be improving the market for investment. Local venture capitalists recently told the Star Tribune they feel more optimistic about investing in companies this year. Still, there is the issue of whether venture capital firms can raise enough money to start new funds. Venture capitalists in a recent survey nationwide said they believe limited partners have an advantage in fundraising negotiations. "They have a limited amount of capital and a lot more [firms] competing for it," said G. Steven Burrill, CEO of Burrill & Co. Burrill told the Star Tribune in 2009 that he planned to raise a $1 billion fund to help bring biotech companies to Pine Island's Elk Run biobusiness park. He's still working on closing the deal with a sovereign wealth fund. "We're making reasonably good progress on it," Burrill said last week. "We're in very serious dialogue with a single investor. We thought it would be done at year's end."