Miners used to take canaries with them into new tunnels to act as an early warning system. The canaries were sensitive to the build-up of poisonous gases and as long as they kept singing the miners knew their air supply was safe.

The National Venture Capital Association, a US trade body, has sounded an early warning about the long-term health of the US initial public offering market.

There were no venture capital-backed initial public offerings during the last quarter in the US – that has not happened in the space of a quarter since 1978, according to the Exit Poll report by the NVCA and information provider Thomson Reuters.

In the first quarter of this year, only five venture-backed companies went public on a US exchange.

Mark Heesen, president of the NVCA, said: "Venture-backed companies that successfully enter the public markets represent a critical job-creation engine for the US economy, and that engine has completely shut down. We view this quarter as the canary in the coalmine."

In worsening economic conditions and falling stock markets, overall IPO volumes have dropped. In the US, IPO volumes were $5.2bn (€3.3bn) in the second quarter, 71% less than in the same period last year and the lowest quarterly volume since the third quarter of 2003, according to Dealogic, an investment banking research provider.

As well as the difficult market conditions, there are structural reasons for the lack of venture-backed IPOs. These include the regulatory costs imposed by Sarbanes-Oxley regulation and the increased legal responsibilities for directors of public companies.

In the NVCA survey, 57% of the 660 respondents said Sarbanes-Oxley was a reason behind the IPO drought, with 77% citing skittish investors and 64% blaming the credit crunch and mortgage crisis.

Lawrence Lenihan, founder and chief executive of FirstMark Capital, formerly the New York-based venture capital arm of Pequot Capital, said: "I sit on the board of a $100m software company and the costs of being a public company have risen to $4m a year, compared with $1m before Sarbanes-Oxley." The NVCA has been lobbying politicians and the US Securities and Exchange Commission to change Sarbanes-Oxley requirements for smaller companies and Heesen said the US Senate’s confirmation last month of the nomination of three new commissioners at the SEC presented an opportunity.

As IPOs become a less viable exit strategy, venture capital firms have had to change their business models, which could potentially lead to lower returns.

Kate Mitchell, managing director at Scale Venture Partners , said that between 1991 and 1995 there were on average 85 venture-backed IPOs each year and usually fewer than 100 acquisitions of venture-backed firms. However, between 2003 and 2007 the average number of M&A deals rose to 340 and fewer than 100 IPOs.

As a result, venture capital firms have been building their portfolio companies for acquisition and the median age of a venture-backed company from start to IPO has reached a 27-year high of 8.6 years, according to the NVCA.

Mark Levine, managing director at Core Capital Partners, based in Washington DC, said many more portfolio companies were being rolled up before an IPO and said funds could generate high returns from acquisitions. Core Capital sold SwapDrive, an IT storage company to Symantec , an internet security company, for $123m and made a return of 12 times its investment.

Levine said: "We did not have the six-month lock-up period as in an IPO and received cash to return to our investors."

Mitchell said that because of the high risk of venture capital investments, Scale Venture Partners expected 40% of its portfolio companies to lose money, 40% to make a return of between two and three times the investment and the remaining 20% to return between five and 10 times their investment.

She said: "We rely on a balance between IPOs and M&A and for most funds, the returns are highly dependent on the outperformers. Everybody is looking for the next Google. "

The NVCA estimated that companies that were once venture-backed but are now public, accounted for 10.3 million jobs and 18% of US gross domestic product.

Dixon Doll, co-founder of California-based Doll Capital Management and chairman of the NVCA, said: "Imagine the implications if Google or Intel decided to forgo a public offering and become acquired because the public market option was unappealing. The next Google may be making that decision right now."

Last year, four of Scale’s portfolio companies were acquired and two completed IPOs. It has been possible to take companies public this year and for them to perform well.

IPC The Hospitalist Company , a network of physicians, backed by Scale Venture Partners , Morgenthaler Ventures , Bessemer Venture Partners and CB Health Ventures, went public in January at $16 per share and filed for a secondary offering last month when the stock was trading at $22.08.

At the end of last month, there were 42 venture-backed companies that had filed for an IPO with the SEC, 40% fewer than the three-year high in the third quarter of last year, according to the NVCA.

Lenihan said he expected a couple of his portfolio companies to go public in the next six months and they all have a record of generating revenues and profits.

He said: "We have companies generating revenues of $100,000 a month just six to nine months after they started so we are not whistling past the graveyard. The best companies are formed in the worst economic times and these are the worst conditions I have seen in 30 years."

Levine agreed. He said: "Some of our companies make sales to the financial services sector, which has been hard hit, but have been able to raise prices as their products lead to increased efficiency and profitability. The strongest companies do better in environments like this."