Venture Capitalists Investing in Later Stage Businesses

Venture capitalists are increasingly looking for established companies to invest in, the “New York Times” reported. For the first half of 2006, 46 percent of first-time venture investments went into established companies – three years or older, and with established revenue streams – up from 30 percent in 1995, according to the National Venture Capital Association. Reasons for the trend include a sluggish market for initial public offerings, and the ability of cash-laden venture capitalists to put more money to work in larger, more established firms.

Last October I helped an entrepreneur finish his business plan over a two week period, for a new medical device that had vastly better technology and ergonomics than what was currently in the market. He was looking for $2 million to stage the introduction. I just got a call from him, this past June, that he was close to securing financing….nine months later. If the trend of venture capitalists looking for more established companies continues, situations such as this will become even more common in the years to come. — dr