Anyone looking for evidence of a mood swing among high-tech start-ups and their financial backers need only listen to the way investment opportunities are being pitched.

Reed Saxon/Associated Press
Forbes Chief Executive Officer Steve Forbes, shown talking to reporters in Beverly Hills, Calif., last April, yesterday told venture capitalists and entrepreneurs in Pittsburgh that the economy and the war on terrorism have made more headway than news accounts would suggest. He predicted job gains and stronger growth for next year but said risks remain.

Just a few years ago, venture capital fairs were giddy with talk of initial public stock offerings. Now, if presentations at yesterday's Three Rivers Venture Fair were any indication, there's more talk about being taken over than seeking fortunes in the stock market.

Of the 25 life science and information technology companies that gave presentations at the fair, a significant number told some 200 venture capitalists that they planned to sell their companies to strategic buyers as a means of cashing out their early backers.

Start-up executives and venture capitalists alike were well aware of the shift, a reflection of a dot.com bust that wiped out fortunes and brought an abrupt and painful end to the late '90s euphoria.

"I think there's a realization that the public markets are still a terrible place to try to raise money right now," said Fluorous Technologies Inc. President and Chief Executive Officer Philip Yeske, who is seeking about $5 million in venture capital and said his company's own exit strategy would likely entail a merger or acquisition.

Craig Gomulka, director of Draper Triangle Ventures, Downtown, said selling to a financially stronger company "seems to be the exit strategy de jour. ... It's a definite change of mindset.''

There's little wonder why. Although the Nasdaq, which often is the stock exchange of choice for young technology companies, has risen sharply since the beginning of the year, it's still trading at a fraction of its pre-crash high.

And although the venture fair's keynote speaker, Forbes magazine editor, Steve Forbes, gave an upbeat view of the economy, the event's chairman, Rob Daley, noted the public markets haven't been very encouraging for new technology companies.

Daley, managing director of PNC Technology Investors, noted only five technology companies nationwide had gone public since the beginning of the year. Even before the frothy markets of the late 1990s, the average was about 150 annually, he said.

Venture capitalists, many of whom had hoped IPOs would be the vehicle for liquidating investments they're still holding -- or in some cases, folded -- are looking for "a clearer path" to returns on their money, said Yeske of Fluorous.

Gomulka, of Draper Triangle, agreed the pendulum had swung too far toward IPOs but said it possibly has swung too far away now. But it's not as if IPOs were the only way venture capitalists and start-ups were making money in the go-go '90s.

While "everyone wishes and hopes and dreams for an IPO, the reality is in good and bad markets, there are vastly more acquisitions than IPOs," said Sean Sebastian, a partner in Birchmere Ventures, a North Side-based venture capital firm. Sebastian said the number of entrepreneurs aspiring toward mergers rather than IPOs, reflected a more "realistic" approach.

"The entrepreneurs who survived the past couple of years have proved their mettle. It's a more seasoned crowd than we used to see."

As healthy as the more realistic attitude can be for the fledgling companies, losing start-ups to larger, acquisition-minded companies might not be exactly what the region's economic developers have had in mind in attempting to cultivate new technology companies and help them find financial backers.

Still, venture capitalists and entrepreneurs alike said takeovers needn't take companies out of the region.

Several noted that California-based Nokia Internet Communications' $21 million acquisition of Pittsburgh's Eizel Technologies in April has not taken the local company away, but instead has provided access to capital for growth. The same could be said for Schering A.G.'s acquisition of Medrad Inc. and, more recently, Florida-based Pediatrix Medical Group's acquisition of Neo Gen Screening.

Yeske, of Fluorous, said that when and if his company seeks a merger partner, it "would be a top priority of mine" to find one that wanted to keep the Pittsburgh operation intact and help it grow.

Acquirers that make the start-ups leave don't necessarily leave the region empty-handed either, others noted.

"It's part of the natural cycle of launching companies. It's not an aberration or a negative," said Birchmere's Sebastian. "If a company gets moved I won't pretend it's a good thing, but often [when] the founders are enriched, they start new companies. Entrepreneurship tends to be in the blood."