Definition of ‘Venture-Capital-Backed IPO’
The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative to an IPO for a venture-capital-backed company is an acquisition (getting purchased by another company). Both options are known as “exit strategies” because they allow venture capitalists and entrepreneurs to get money out of their investments.
Multiple sources regularly report on both venture-backed IPOs and M&A volume. In lean economic times, there tend to be fewer venture-capital-backed IPOs because of low investor confidence. As a result of the financial crisis, 2008 and 2009 saw record low numbers of venture-capital-backed IPOs. Examples of companies that were once venture-capital-backed IPOs are Tesla Motors and Open Table.