VCs Have Longer Wait for Returns

TechFlash reports: It is taking much, much longer for venture capitalists to earn money on their investments in software, communications and electronics-- one of the big problems plaguing the venture industry. According to research released today by SVB Analytics, the median-month-to-exit for a venture-backed software company in 2008 was 91 months or nearly eight years.

That compares to the dot-com boom year of 2001 when it took just 21 months for a company to get from series A financing to an IPO or acquisition. Of course, those frothy times may never return and they created serious problems that VCs are still dealing with.

Nonetheless, the 91 months represents the longest amount of time for VCs to realize exits in the software business in at least 14 years. In 1998, by comparison, it took just 26 months for venture capitalists to see returns.

Other industries -- including communications/networking, medical devices/equipments and electronics/hardware -- also are at high points in terms of the amount of time it takes VCs to cash out.

Of course, more time equals more money. And the report also shows that it is taking more money -- $22 million in 1998 -- to get a company to an exit event.

That compares to just $9 million in 1998. (The high point was $25 million in 2006.)

SVB also released research for semiconductors, biopharmaceuticals, electronics/hardware, communications/networking and medical devices/equipment.

The electronics/hardware industry also was at high point in terms of median-month-to-exit at 77 months, as was medical devices/equipment at 88 months; and communications/networking at 86 months.

The semiconductor industry saw a sharp drop off in the amount of time it takes for a venture-backed company to reach an exit, down to 48 months in 2008 from 74 months in the prior year. Biopharmaceuticals saw a small decline in the amount of time to exit, down to 64 months in 2008 from 72 months.