Venture capital exits show signs of life in 1st quarter

Nine venture capital-backed start-ups went public in the first quarter of 2010, and 31 mergers and acquisitions averaged $180.2 million--a 21 percent increase over the total disclosed transaction value for all of 2009.

The signs of life in the venture capital market is reason for "cautious optimism," said Mark Heesen, president of the National Venture Capital Association in Arlington.

He warned that the initial public offering level is still "not nearly enough to declare a recovery," but it has shown the "most improvement since the financial crisis began."

The largest number of IPOs and acquisitions were in the information technology sector during the first quarter, NVCA and Thomson Reuters reported today.

In that sector, computer software and services and Internet specific companies made up the bulk of the targets, with 35 and 26 merger and acquisition transactions, respectively.

The life sciences sector saw the second-highest level of activity with 21 deals and had the highest transaction value with $2.9 billion.

This is good news for the tech industry. Innovative start-ups rely on investors to fund hiring and development costs until the companies can stand on their own two feet. Now that investors are beginning to get better returns on those investments, they will likely be more willing to invest in new firms.