Exit Strategy or Not?  Prospects for Today’s VC-Funded Companies

July 17, 2008 | Posted by: Alisa Valudes

So far, July is testing the venture capital (VC) markets in a new way. A wave of not-so-optimistic news is painting a grim reality for today's venture-backed companies. In early July, The National Venture Capital Association (NVCA) released a report on the state of venture capital that reported that for the first time since 1978, we've had a whole quarter (in Q2 2008) without any venture-backed IPOs. What does this mean? A true drought of IPOs for the first time in nearly 30 years. NVCA is calling it "a capital market crisis for the start-up community".

Venture capitalists have always been our nation's engine for innovation. They fund the next big ideas, while paving the way for some of the greatest blockbuster companies in both technology and healthcare to emerge.

At the same time, a July 14 article in U.S. News & World Report entitled "A Venture Capital Crunch?" reveals how it is getting more competitive than ever for an entrepreneur to find the VC funding necessary to launch his or her idea.

Like everything else, though, this too is cyclical. The question is how long will it last? And in the meantime, what should a venture-backed company do today?

In terms of exit strategy, IPOs are looking to be less of an option. This leaves getting acquired. And this is where PR can play a strong role - in helping to build valuation for a company, while priming the market for acquisition. Over the years, more than a dozen Merritt Group clients have been acquired (ServiceBench, Pointsec, SPI Dynamics, Network Solutions, MCI, UUNet Technologies, DigitalNet, SIGNAL, VerticalOne, Veritect, and others). We know how to create the right level of "buzz" for our clients. Our communications strategies work together to help clients capture market leadership, while being positioned as a "company-to-watch" in front of potential acquirers.

While there are no easy answers to how today's landscape will play out, what is for certain is that there are many ways for VC-backed companies to maximize their prospects for an exit strategy.