Great news this morning from Dow Jones VentureOne on the health of the start-up industry, which the research firm finally declares to be in the midst of a“liquidity boom”!
Already this year some $28.4 billion has been raised through M&A transactions, with 90 of these mergers or acquisitions taking place in the third quarter alone (worth a total of $11 billion). It is the largest number of M&A deals in one quarter since 2000 Another $4.7 billion has been raised in public offerings so far in 2007, and while there were only 11 IPOs in Q3, 46 startups giled to go public in the 3rd quarter.
All in, says Jessica Canning, Director of Global Research for Dow Jones VentureOne:
“[The data] virtually guarantees that 2007 will be the largest year for venture-backed liquidity—both in terms of IPOs and M&As—in the U.S. since the dot-com boom… [the] ‘venture capital rebound’ is officially over.”
Of course most of the money was generated in software company deals ($5.4 billion in M&A of software shops alone, thanks Google). But a word to Found|READers looking for a new niche: 22 of the 46 IPO registrants are healthcare startups; and median post-m&A valuation for healthcare companies is up two-fold from 2006, to $125 million — far-exceeding median post-M&A valuations for IT startups, at just $83 million. (But this is still a highwater mark for IT M&A since 2000, so it’s not all bad.)
The point is, if you’re looking for an area where the appetite for new business ideas is big, and where you can leave a truly innovative mark on the world, we urge you to consider healthcare. This is a major pain point in the U.S. economy, and innovative solutions are badly needed — more so we’re sure, than one more Facebook application — and why healthcare will dominate debate in the race for the presidency in 2008.
Think of it this way: that $110 billion estimate for the cost to deliver medical care to the 50 million Americans who don’t currently have health insurance (and it’s low!) is a big, giant, untapped greenfield for new businesses. Large competitors aren’t likely to try to tackle it, out of a fear of regulators and red tape. But a smart, strategic startup need snare a tiny piece of this to make a lot of money.
And now we’ll leave you with one cautionary note, that was tucked into the end of the Dow Jones VentureOne data release. The startup trade may be back, but founders must be prepared to invest a record number of years in their businesses these days.
…it is also taking longer to exit portfolio companies. The report showed the time between initial equity financing and M&A also reached its highest level ever in the 3rd quarter at 7 years [and] the median time between initial equity financing and IPO reached a record 8.5 years in the 3rd quarter.
So, gone is the era of the 18-month-old startup selling for hundreds of millions. This is just one more reason to found your business around something you’re truly passionate about. The investment in time and effort will necessarily be big, but as these dats show, once again, so too can the pay off be BIG!
Comments have been disabled for this post