Stepping Out, Not Up: Better Returns for VCs Through M&A?

If there was any question about whether it's becoming more difficult for venture capitalists to cash in with an IPO, comparing the recent IPO window of 2003-04 with the previous window in 1999-2000 should settle most arguments on the subject. (See Exhibit 1.) This analysis even omits the nearly uniformly poor performances of 2005's biotech IPO class, which has been beset by IPO price slashing and poor aftermarket trading. (See "Bad Haircuts: 2005's Biotech IPOs—Getting Out at Any Price?" START-UP, March 2005 Also see "Bad Haircuts: 2005's Biotech IPOs--Getting Out at Any Price?" - Scrip, 1 March, 2005..)

What's more, in the recent past, compared to the 1995-96 and 1999-2000 windows, biotech companies are having to raise a lot more cash before they can go public. The average...