Venture-Backed IPOs Rebound in Quarter, Raising $2 Billion

U.S. initial public offerings of stock in companies backed by venture capital firms raised $2 billion in the second quarter, almost quadruple the first quarter’s total.

Nineteen companies funded by venture capitalists raised the largest quarterly sum since almost $3 billion was raised in the fourth quarter of 2004, said the National Venture Capital Assn. and Thomson Financial. A year earlier, 10 venture-backed companies raised $714.1 million, and in this year’s first quarter, 10 companies raised $540.8 million.

The growth defied a slump in demand from investors for IPOs. The Bloomberg IPO index, which tracks companies in their first year of trading, declined 7% since a May 9 peak, compared with a 4% drop for the Standard & Poor’s 500 index. Nine U.S. offerings were withdrawn or postponed in June.

“Investors are very skeptical about IPOs at the moment,” said Roger McNamee, managing director of Menlo Park, Calif.-based Elevation Partners, a venture capital firm specializing in media and entertainment. McNamee said that venture capitalists are diversifying into industries beyond the traditional technology and health fields, and these new companies will be the ones to watch.

Venture capitalists provide new companies with financing and management advice. In return, the firms receive a stake in companies that they back, and often use initial offerings to recover their investment. This makes some venture capital firms dependent on strong demand for IPOs.

The largest venture-backed IPO of the quarter was the $531 million offering May 23 by Vonage Holdings Corp.