The extraordinary boom in private funding for early-stage businesses has attracted banks and mainstream investors into territory long‑dominated by venture capital firms. In response, some venture capital firms are starting to look more like banks and mainstream investors. This seems a risky strategy.

The top venture capital firms have had a spectacular few years, with returns outpacing those of even the leading private equity funds. That has sucked in more money, boosting global venture capital investment to more than $600bn last year — double the 2020 figure. Much of the growth came from non-traditional investors, such as private equity funds, family offices and pension funds.