Heesen

Don't look for the initial public offering market to recover in the first half of 2010. That's the word from Mark Heesen, president of the National Venture Capital Association who spoke tonight to a group of venture capitalists, lawyers and bankers at the Four Seasons in downtown Seattle. Heesen is a little bit more hopeful about acquisitions, but when it comes to IPOs he remains "pessimistic."

"We've had 11 (venture-backed IPOs) this year, maybe we will get one more at the end of this year. And, if you see 30 next year, 30 is still an abysmal number," said Heesen, speaking at the Evergreen Venture Capital Association's annual holiday party. "We should be -- eighty to 100 IPOs is a decent year. And I am not saying we should go back to 1999 or 2000. But if you really want to see (limited partners) get checks at the end of the day, you need 100 to 140 IPOs. And that's not where we are right now by any means."

There was also some great back-and-forth about the IPO market between Heesen -- the pessimist -- and Seattle attorney Craig Sherman -- the optimist.

A partner at Wilson Sonsini Goodrich & Rosati, Sherman noted that things have improved from 12 months ago when he bluntly told a group of entrepreneurs and investors that "things suck" in the venture capital market.

Sherman presented a much more hopeful message this evening in which he noted that several clients of the firm are working on initial public offerings.

Sherman

"We are swamped with IPOs right now," said Sherman, one of the attorneys who led Seattle biotech Omeros onto the Nasdaq in October. "There will be quite a few coming in the next couple of weeks."

Heesen said he's heard that optimistic viewpoint before. And he said he gets frustrated with press reports about the opening of the IPO market, with journalists reporting that the number of venture-backed IPO has almost doubled over last year.

"Factually, that's true. It went from six to 11," said Heesen. "But you read this stuff, and I've said this so many times, but I have been in so many cities where lawyers and accounting firms have come up to me and said: 'we are working on so many registrations right now, our office is full, we are going to see this pipeline.' And I have been hearing this for months. We have had 17 companies in registration for months.... But have we seen any major increase in the number of venture-backed IPOs and SEC registrations over the last couple of months? No."

Heesen continued:

"So, it is very hard for me to see a vibrant IPO market this quarter, the first quarter of next year and even the second quarter of next year. Until we see 100 companies in registration, at least, you are not going to have a vibrant IPO market. I hope the lawyers are right. But I have yet to see this deluge of companies going to register. They might be putting the documents together, but they sure as heck are not sending them to the SEC."

What does that mean to the venture capital industry?

Heesen bluntly said: "This is an industry that is shrinking, and it will continue to shrink."

It wasn't all doom and gloom. Heesen noted that venture capital-backed companies are still hiring, and he noted some positive developments in public policy. The Evergreen Venture Capital Association -- the alliance of Washington state venture capital firms -- also announced its "Deal of the Year."

The award went to Free & Clear, a smoking cessation service that sold to Inverness Medical Innovations for $130 million earlier this year. Backed by Polaris Venture Partners and others, the Seattle company raised a total of $17 million before selling out.

Previous winners include SnapIn Software (sold to Nuance) and Sharebuilder (sold to ING).

John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.