Reuters/NVCA Press release

Venture-Backed Exit Market Improves Marginally at Year End – IPO Market Shows Preliminary Signs of Life

New York, New York, January 4, 2009 – Venture-backed company exit activity showed promising signs of life during the fourth quarter of 2009 but fell far short of historical norms for the year, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). The year ended with 13 venture-backed Initial Public Offerings (IPOs) and 262 M&A transactions.

While there were five venture-backed IPOs in the fourth quarter, a slight uptick from the third quarter of 2009, the last two years have been the slowest consecutive years for US venture-backed IPO activity since 1974-1975. The tally of M&A exits as of the last day of the quarter was 67 with 36 disclosed deals averaging $215.9 million, the highest quarterly average since the fourth quarter of 2007.

“While 2009 was a year many venture capitalists and entrepreneurs would choose to soon forget, the fourth quarter offered signs of hope for the coming year in terms of improved exit activity,” said Mark Heesen, president of the NVCA. “Clearly, we have a long way to go towards a full recovery but we are encouraged by the increasing acquisition values and the number of companies that have filed a registration with the SEC to go public. We expect to see a gradual but marked improvement in 2010 and hope to have exponential improvements this time next year.”

IPO Activity Overview
There were five venture-backed IPOs valued at $649.3 million in the fourth quarter of 2009, a slight increase from the third quarter of 2009. With 13 venture-backed initial public offerings during full year 2009, the annual total more than doubles activity in seen 2008, by dollars raised and number of offerings. However, the last two years have been the slowest consecutive years for US venture-backed IPO activity since 1974-1975.

Two of the five IPO exits for the quarter were in the information technology sector, accounting for a total of $236.2 million. Within this sector, Sunnyvale, California-based, Fortinet, Inc, a developer of network protection systems, raised $156.3 million. Echo Global Logistics, a Chicago-based provider of transportation management solutions began trading on October 2nd and raised $79.8 million in the communications and media sector.

In the biggest IPO of the quarter, KAR Auction Services, an automotive services holding company based in Carmel, Indiana raised $300 million via a listing on the New York Stock Exchange.
There were no initial public offerings by US venture-backed companies on a foreign exchange in the third quarter.

Of the five IPOs in the third quarter, two were trading at or above their offering prices as of 12/30/2009. For the year, nine out of the thirteen IPOs were trading at or above their offering. Twenty-nine venture-backed companies are currently filed for an initial public offering with the SEC.

As a member of TechAssure, we help author and distribute a great newsletter designed for technology companies. I am “reprinting” an article from the most recent edition of the newsletter.

Contributed by Kirstin Simonson
Travelers Underwriting Director, Global Technology

As more and more adults embrace social media, the upside for business is a new way to get their message out. The downside, however, is an increased exposure to liability that many companies may be unaware of until it is too late.

Today, companies are discovering that YouTube, Twitter, Facebook and other sites have reached beyond their original teenage audiences and have become an at-work pastime for many employees. A recent survey conducted on behalf of Travelers found that close to half of the adult population uses social media. One out of eight respondents said they post work-related information on social media web sites, and 30 percent feel such postings are acceptable as long as they believe the information is true. In addition, 75 percent said they were “not at all” or “not very” concerned about online postings causing professional damage.

Unfortunately, the risks from cavalier use of social media are real. Already companies have had to defend themselves against defamation lawsuits from postings by employees, even when such activities were not within the scope of work and violated policies about personal use of company computers. One health care clinic was sued after an employee posted information from a medical chart about a patient’s treatment online.

How can insurance and risk consultants help companies mitigate the risks they face from their employees’ online activities? By encouraging them to follow a three-step plan:

1. Understand the potential exposures. Damages may result from legal liability for defamation, harassment and privacy violations. Or they may involve the leak of proprietary information and trade secrets that can undermine a company’s competitive position. A third area of risk is damage to the reputation of a company through false or disparaging postings.
2. Establish policies to manage exposures. Create policies and notify employees regarding expected conduct related to social media sites including blogs, email, instant messaging, tweets and other technology tools. The policies should include clearly described consequences for violating guidelines. Once in place, the policy should be enforced uniformly and consistently.
3. Prepare for the unexpected; seek advice on how to manage your risk from a cyber liability expert. Businesses should work closely with their insurance agent to evaluate their cyber risks and reputation management exposures. Development of a crisis management plan to handle incidents as they arise is recommended. For example, identification of strategies for managing negative publicity and removing false postings from social websites may be included in the plan.

By following a game plan of identifying risks, creating effective policies and planning in advance for problems, a company can create a culture of awareness about the drawbacks that come with the careless use of social media. Insurance and risk consultants can partner with businesses to help them embrace the upside opportunities of social media while protecting themselves from unexpected liabilities.

This article is only for the informational use of the reader. Information contained herein is not intended as, nor does it constitute, professional advice and it is not a representation that coverage does or does not exist for any particular claim or loss scenario.