I saw this data from Private Equity Info and discussed this trend with Kendra Jalbert who authorized me to blog this. Note that these data points are medians not average. I think the actual time delay between series A to exit grew from 2 years in 2002 to 7 years by the end of 2008 and then that last quarter was a disaster and no one wanted to sell their business at low market prices in 2009 making the real ride 9 years for series A VCs and longer for angels. Now the time delay from series A to exit is clearly coming down, but the new mantra in the Valley is “Stay private longer!” Smart, well connected, high growth privately held companies are providing liquidity programs selling $5m to $50m or more each year as they need some liquidity on an otherwise long march to the definitive liquidity event for the company. This means that investors are investing into later stage companies providing some cash out for the founders, early employees and investors. The money is not going into the company, but insiders are selling a small percentage of their position for some liquidity while the company soldiers on.
Here’s what Private Equity Info found:
Private Equity Holding Periods Nearly Double
Intuitively, we know that private equity firms tend to hold their portfolio companies longer during recessionary periods – delaying exits during recessions and accelerating exits during boom years to capitalize on enhanced valuations. An analysis of portfolio company data from www.PrivateEquityInfo.com shows the median holding period significantly affected by overall economic conditions. Interestingly, the median holding period has nearly doubled in the last decade.