The StartupJournal offers some additional insight into a trend that I have been documenting here for some time: venture capitalists are more than ever shifting to later stage, more mature companies for their investments.
Such trends are a sign that many venture-funded companies, particularly those in industries like wireless and pharmaceuticals, still need significant cash to ramp up operations. But it also indicates a problem for venture firms: Their funds, which raised tens of billions of dollars during the dot-com boom and never spent it all, are now scrambling to find places to put their remaining cash before the fund's life, usually 10 years, runs out.As a result, venture capitalists are opting for bigger investments in more mature companies, since those firms might go public or get bought more quickly than newer firms. The goal of any venture-capital investment is an "exit," usually in the form of an IPO or an acquisition.
They highlight the trend using this graphic from the National Venture Capital Association:
An additional factor in all of this is the unintended consequences of Sarbanes-Oxley. Very few smaller companies are able to use an IPO as a liquidation event due to the costs of compliance with Sarbanes-Oxley. Start-ups have to find funding with more "patient money," typically from angel investors.
