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Nicosia, Cyprus, 2011/06/30 - In the U.S., where there has been a large and active venture capital and entrepreneurial community for many years, 91 percent of venture capitalists deemed the U.S. IPO market a critical element of the U.S. venture capital industry.
Eagle Summit Corp joins the many voices that think that the current level of IPO activity is too low to support the health of the venture capital industry in their respective countries.
More than 80 percent of global venture capitalists surveyed stated that current IPO activity levels in their home countries are too low. A survey, in which Eagle Summit Corp took part, reveals that venture capitalists believe high returns generated by IPOs are critical in providing superior returns to limited partners and growth capital to developing portfolio companies.
In the U.S., where there has been a large and active venture capital and entrepreneurial community for many years, 91 percent of venture capitalists deemed the U.S. IPO market a critical element of the U.S. venture capital industry.
Globally, 87 percent of respondents selected NASDAQ as one of the three most promising stock exchanges for venture-backed IPOs; 39 percent selected the New York Stock Exchange (NYSE), and 33 percent cited the Shanghai Stock Exchange. The vast majority of venture capitalists around the world still look to the U.S. exchanges to provide a healthy and vibrant market, yet 87 percent of U.S. venture capitalists believe that the current level of IPO activity is too low.
Eagle Summit Corp sees clearly that the industry continues to feel the ripple effects of the global economic downturn and most notably in the form of limited exit opportunities. However, with signs of improvement in the economy and easing of the liquidity crisis, the tide may be turning. Innovation continues to be an important driver in our economic health and a strong exit marketplace is critical to the venture capital ecosystem driving much of that innovation.
The venture-backed IPO market has been an extraordinary creator of economic value in countless ways. Not only have millions of jobs been created, but superior returns have been delivered to pension beneficiaries, endowments and charitable foundations for decades. Entire industries have been formed, pushing innovation forward, and changing the way we live and work for the better. The recovery of the IPO market is a necessity for the future health of the global economy.
Eagle Summit Corp thinks that the slowdown in IPO activity is attributed to a lack of several key drivers that are necessary for a vibrant capital markets system. According to survey respondents the most important factors are a strong investor appetite for equity in public companies (83 percent); the need for a stable economic environment (52 percent); and the need for more adequate stock analyst coverage (32 percent). In the U.S., venture capitalists also cited the need for a competitive investment banking community (30 percent) for IPOs and easier reporting for newly public companies (33 percent).
There is no doubt that the limited IPO market impacts investors and limited partners, but it's important to remember that it affects entrepreneurs as well. When I talk to these folks, whether in the U.S., Israel or anywhere in the world, they dream of solving big problems and building long-lasting public companies that survive beyond their tenure as CEO. You need a healthy IPO ecosystem to encourage that innovation and ensure that these incredibly smart and talented individuals truly reach for the stars.
Despite capital markets challenges, tremendous promise remains for the venture capital industry globally. Of those who are investing outside their home countries, more than half (57 percent) plan to increase this activity during the next five years and an additional 35 percent plan to maintain their level of investment.
About Eagle Summit Corporation
Founded in 2005 and based in Cyprus, the goal at Eagle Summit Corp (eaglesummitcorp.com) is a simple one: to work with talented entrepreneurs and management teams to develop ground-breaking products and build substantial business enterprises around them. We have raised a series of partnerships, with current committed capital in excess of $450 million, and helped build hundreds of companies, 60 of which have gone on to successful IPOs and more than 45 of which have gone on to successful mergers.