What is Venture-Capital-Backed IPO?

Before we define Venture-Capital-Backed IPO, it is important to understand initial public offering or IPO. IPO is the very first sale of shares issued by a company to the public. A company is considered private before an IPO, with a few f shareholders made up mainly of early investors and professional investors.

Venture-Capital-Backed IPO is the selling of shares in a company to the public that has earlier been funded by venture capitalists. The alternative to venture-capital-backed IPO is an acquisition. Known as exit strategies, both options allow entrepreneurs and venture capitalists get money out of their investments. Open Table and Tesla Motors are examples of companies that were formerly venture-capital-backed IPOs.

Many sources regularly report on venture-backed IPOs. In lean economic periods, there are fewer venture-capital-backed IPOs due to low investor confidence. After the financial crisis, the period between 2008 and 2009 was characterized by low numbers of venture-capital-backed IPOs. During that period only 10 VC-backed companies went public.

According to Grabow, about 39 VC-backed companies had an IPO in 2016. Of these companies, 13 venture-backed IPOs were tech, according to Shoshanna Delventhal of Investopedia. Today, there are about 17,000 VC-backed companies. It is expected that this year will see many venture-capital-backed IPOs.

References

https://www.forbes.com/sites/moiravetter/2017/01/21/ey-says-venture-capital-is-ready-to-go-ipo-in-2017/#c31a940240c7

http://www.investopedia.com/terms/v/venture-capital-backed-ipo.asp

http://www.investopedia.com/university/ipo/ipo.asp

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