The garage is giving way to the cubicle. Venture capital firms, long synonymous with early-stage investing in entrepreneurs toiling away in their garages, are increasingly emphasizing later-stage deals. Billions of dollars are now going into companies with hundreds of employees and even profits and actual office buildings.
The trend is being driven by several factors, but chief among them is a sluggish market for initial public offerings. That means it is taking longer and costing more for start-ups to go public, making investing in the rawest firms a more expensive proposition. At the same time, limited partners — the institutions and well-heeled individuals who trust venture capitalists to bring them big returns — are providing the industry huge supplies of money. And that money has to go somewhere.