The liquidity drought for venture-backed startups, which was already declared to be a crisis in the second quarter when not a single VC-backed IPO went out, continued in the third quarter. For the first three quarters of the year combined, IPOs brought in only $470 million and M&A activity totaled $11.3 billion, a steep decline from prior years (see chart). Don't expect the situation to get better any time soon.Although there was one IPO in the third quarter, RackSpace, which brought in $187.5 million, that was less than half of what the company had expected to raise when it initially filed. In the third quarter of 2007, by comparison, IPOs brought in $945 million. Mergers and Acquisitions activity was also down in the third quarter, bringing in $3.5 billion compared to $10.8 billion in the third quarter of 2007, according to The National Venture Capital Association and Thomson Reuters.

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