New Haven Biz recently published a story with the headline “IPO, SPAC slowdown may crimp New Haven biotech growth.” Speaking at the Yale Innovation Summit — of which FML is a gold sponsor — back in May, Arvinas CEO John Houston cautioned startup executives about the “more or less dead” IPO market.
I pointed out that, despite the recent damper on venture capital, the region’s fundamentals are still strong. “It’s not going to stop, it’s just going to be different.” Here’s the full section where I share my thoughts on the current state of VCs in CT.
The recent upheaval in the markets has put a damper on venture capital and other financing activity, but the region’s fundamentals are still strong, said Frank Milone, of accounting and consulting firm FML. In addition to offices in Enfield and Glastonbury, FML also staffs an office in New Haven’s District technology and coworking campus as direct outreach to emerging companies, many seeking additional capital.
With valuations sliding, VCs are recalculating their potential stakes in companies and the timeline on their returns.
“It’s evolving pretty quickly,” Milone said. “I think you’ll see more focus on more fundamentally sound companies. It’s not going to stop, it’s just going to be different.”
More marginal startups face the biggest challenges, according to Milone.
“When the going is good, when the markets are really hot and there’s a lot of money flowing in from the venture side into these companies, they have a lot more ability to take more chances,” he said.
Even though IPOs and SPACs have drawn the most attention in recent years, much of the activity around Connecticut’s startups continues to revolve around mergers and acquisitions, Milone said. Those deals are continuing, most recently Pfizer’s $11.6 billion purchase of New Haven migraine drugmaker Biohaven in May.
Milone’s advice to emerging companies is to sharpen up their management team and marketing to investors: “How is your technology different? What does it do? How does it create value? That message needs to be pretty crystal clear.”