Time for Extra Innings

With the IPO market cooler than a penguin’s toes, VCs are forking more money into their late stage startups to keep them rolling.

Some 57 companies raised $20 million or more from VCs for a fifth, sixth, or seventh round of financing so far this year, according to data from Thomson Reuters (publisher of PeHub.com).

What does that scary stat mean? Simply this: companies are going into extra innings on the venture capital dime and exits will have to be more lucrative to return that committed capital.

I ran the data to try and find firms that liked to make this type of investment: a late in the game private-public arbitrage. The sort of thing Technology Crossover Ventures used to do. I was hoping to put together a short list of firms to pitch to get a few extra innings during the IPO slump. But there was no name that popped up enough to mention.

Download the data.

My first conclusion was that you’re screwed if you need to find someone to finance yet another round while the IPO market sorts itself out. But that may have been a bit premature.

Somebody backed 57 companies who were in this exact position this year. The fact there was no single name that jumped out from the list indicates the breadth of financing available for just such opportunities. Going into extra innings may be a cinch: just talk to any one of twenty firms that are doing late stage financing.

That tracks a little closer to what I heard from late stage investors I talked with yesterday. They’re seeing very little downward price pressure in late stage deals–despite the IPO drought.

Still, anecdotally, I heard that many of the capital sources that one might turn to for a little extra juice–hedge funds, investment arms of I-banks, debt providers–had all headed for the hills. So it may mean that the deals getting done are insider-rounds: deals done by the existing VCs that may preserve existing valuations.

Got an insight into what’s going on? Leave a comment or drop me a note: Alex [dot] Haislip [at] ThomsonReuters dotcom.