Speaking at AlwaysOn's Stanford Summit yesterday, Jefferies vice chairman Paul Deninger gave three reasons why venture capitalists should be "deeply concerned".

1) Technology M&A deals are flat over the past six years - There have been more large deals but the overall number of deals is flat
2) Many buyers in deals worth more than $50 million over the last 18 months are private equity firms - 6 of 10 largest M&A transactions last year are by private equity firms (KKR, TPG, Madison Dearborn, Silver Lake, Blackstone); the biggest technology deal in US last year and Europe were semiconductor leveraged buyouts (Freescale, Philips)
3) In 2006, 35% of all tech deals worth more than $100 million were done by 10 companies - Those companies have an average market cap of $100 billion

His point is that since venture capitalists are dependent on exits, the flat M&A market, the evaporation of the debt bubble damaging the private equity players and the increasing leverage gained by the top ten buyers means venture capitalists face serious pressures going forward.

Deninger's solution? Rev up the IPO engine so that more startups with smaller market caps can gain liquidity via the public markets.

For more on the AlwaysOn conference, see:
Andy Plesser
Robert Scoble

Tags: ipo, paul+deninger, alwayson, alwayson07, alwayson2007, ao2007, ao07, venture+capital