Mannerisms

Earlier this year, Apax, which used to be Europe’s largest VC operation, announced that none of the latest fund it had raised would be used for venture capital-backed start-up companies. Instead, the whole bang shoot was going to be invested in buy-outs, private equity style buy-outs.

The fund that we are raising now will invest solely in buyouts,” said an Apax spokesman at the time, "we haven't made a VC investment for a few years. It's increasingly untenable for one firm to do multi-stage venture capital investments at one end, and billion dollar buy-outs at the other end. And it’s also a matter of our internal resource allocation."

The truth of the matter is that VC investments are typically small, and private equity investments are typically large.

It’s more profitable to employ a guy working on a billion dollar private equity buy-out, than to have ten guys working on $100m VC investments.

Now, however, with the private equity buy-out party over, investors aren’t giving their money to KKR or Blackstone.

Instead, investors are looking at high-tech deals where the returns per deal are lower, but the quality of the return is in the hands of entrepreneurs and engineers, not at the whim of wildly unpredictable markets.

It is reported that bankers specialising in high-tech investments have seen a renewed interest in investing in the technology sector since the credit crunch.

At the same time, a couple of successful high-tech IPOs by VMware (in August) and Blade Logic (in July) have signalled that the stock market is once again providing a healthy exit opportunity for investors in high-tech start-ups.