Business Matters: Shrinking IPO Market Hurt Venture Capital in Q3
Business Matters: Shrinking IPO Market Hurt Venture Capital in Q3

Shrinking IPO Market Hurt Venture Capital in Q3
-- Venture capital fundraising fell to an eight-year low in the third quarter, according to the National Venture Capital Association (NVCA). Firms raised $1.7 billion in the quarter, down sharply from the $3.5 billion raised in the third quarter of 2010 and the smallest amount since the third quarter of 2003.

The inability of investors to exit through an IPO is hurting firms' ability to raise money. This may not be a big factor in digital music circles since few of the startups will have IPO potential. But the initial sale of public stock, which allows the VC firm to cash out of a company and return value to its investors, is an integral part of the VC landscape.

"Until we begin to see a steady and sustainable flow of quality IPOs, which return cash, limited partners will remain on the sidelines and the venture industry will continue to contract," NVCA president Mark Heesen explained in a statement.

This news comes a week after data by the NVCA and Thomson Reuters showed only five venture capital-backed companies had IPOs in the third quarter -- the worst showing since 2009 in terms of number of IPOs and their dollar value. And as the Huffington Post points out, many of 2011's IPOs are underwater, including Demand Media, Zipcar and Pandora Media.

But investors are not completely without exits: 109 venture capital-backed companies were acquired in the quarter.

Third-quarter fundraising was led by Menlo Park, Calif.-based Shasta Ventures Management & Longitudinal Capital Management, which raised $265 million and $159 million in two separate funds. The fundraising tracked by NVCA covers amounts raised for firms' investment funds. It does not indicate how much of VC firms' funds have been invested in startups.

The fourth-quarter is off to a good start, however. On Wednesday came the announcement that Northern Light Venture Capital closed its Northern Light Venture Fund III LP with $400 million in capital.
(Press release)

New Grooveshark Deals: DashGo, Nu Groove Records
-- On-demand music service Grooveshark has signed new licensing deals with two labels, DashGo and Nu Groove Records. DashGo represents 115 labels, including Delicious Vinyl and Time Records; more than 4,500 bands like Coconut Records and Rock Mafia; and more than 50,000 tracks come from DashGo. Nu Groove was re-launched in 2007 after a 10-year hiatus and was originally the home of smooth jazz artist Michael Lington. Its roster currently includes Jay Soto, J.Dee and the group Lake Effect.
(Press release)

Mute Synch-Licensing Now Handled By Bank Robber
-- Bank Robber Music is now handling sync-licensing duties for Mute Records. Current Bank Robber clients include Merge, Barsuk, Jagjaguwar, Thrill Jockey, DFA and Numero Group.

"We are very proud of this new association," Bank Robber Music's Lyle Hysen said in a statement. "What is most incredible about Mute, besides the vastness of its catalogue, is the musical history the label brings."

That history includes new album releases from M83, Erasure, Apparat and S.C.U.M.

7digital Expands To Asia-Pacific
-- 7digital announced Tuesday its expansion to the Asia-Pacific region, with e-commerce stores opening in Australia, New Zealand, Malaysia and Singapore. Consumers in these countries will be able to purchase high-quality MP3 music from 7digital's extensive catalogue. The new 7digital stores and mobile apps for the Android and BlackBerry platforms will launch in the next few months, with all live by the end of the year.

Denmark Rules On First Sampling Copyright Case
-- In Denmark's first copyright case involving sampling, the electronic group Djuma Soundsystem was found guilty of using an unauthorized sample of the song of Atilla Engin's "Turkish Showbiz." The group told its label, EMI, that the song did not use any samples. It was a mistake that ended up costing the band 747,182.82 kroner ($137,140), plus costs for a song that sold a reported 150 copies. "We were young and stupid," band member Lars Bjarno said. "We want to pay. But we don't want to pay a ridiculous amount that we haven't even made on the record."
(The Copenhagen Post)