Adding to the overflow of capital infused into the venture capital-verse, the definition of venture capital is expanding.
Peter T. Martenson, San Diego-based partner at Eaton Partners, said the definition of venture capital is much broader nowadays.
Mr. Martenson said $400 million "used to be a huge venture fund." These days, $1 billion funds are more common. Tiger Global Management LLC recently closed a $4 billion venture capital fund, one of the largest.
What's more, growth capital, which is invested in larger, growing companies, is effectively becoming part of the definition of venture capital. Many growth capital funds are including companies that would also fit in late-stage venture capital to small buyout-type portfolios. Now, growth capital funds are being included in a single portfolio with venture capital funds and vice versa, he said.
Many of these growth capital funds are quite large, Mr. Martenson noted.
Neuberger Berman's Dyal Capital Partners unit raised $9 billion for its fourth fund that closed in late 2019. The fund exceeded its target by more than $3.5 billion and is listed as a growth fund, he said.
Those growth capital funds are soaking up a large amount of institutional capital. Investors consider them a less risky version of venture capital, Mr. Martenson said.
In growth equity, investors are taking buyout and operational risk in growing companies that often are producing revenue but not yet profitable, he said. However, in venture capital, investors are taking on technology risk — the chance the portfolio company's technology won't result in a product ready for market in time — impacting the company's viability.