The Battle for Growth-Stage Dominance: Private Equity vs. Late-Stage Venture Capital

The line between private equity and late-stage venture capital is blurring, with both racing to control the same territory.

A few years ago, late-stage venture capital and private equity operated in separate universes. VC chased fast-growing startups in a world of abundant liquidity and high valuations, while PE focused on steady, cash-flowing businesses.

But as access to capital has surged and exits have dried up, these two universes have begun to merge. Today, both deal-making approaches hunt the same kind of companies and are writing increasingly similar checks. What began as overlap has become competition, and growth-stage investing now sits where the two investment models collide.

As the value of assets under alternative management surges past $13 trillion, private equity and venture capital funds are increasingly colliding in the growth stage. Lower middle-market PE funds are being pushed down market (now targeting sub-$250 million companies), and late-stage VC funds are being pushed up market (now write $100 million-plus checks into maturing startups).

This overlap is driven by an excess of capital and a scarcity of liquidity events. In other words, there is a lot more money in private markets today, but fewer opportunities for private funds to exit investments.

Looking at fund size data from 25 significant lower mid-market PE funds and 25 notable late-stage VC funds, we see that although PE does larger deals on average (roughly $100 million versus $40 million for VC), the standard deviation shows a significant spread: $36 million for PE and $49 million for VC.

Late-stage VC Funds such as Tiger Global and Dragoneer consistently invest in startups valued between $70 million and $100 million, while PE funds such as Updata Partners and Strattam Capital purchase companies in the $80-$120 million range. This crossover is striking, as many companies targeted by late-stage VC are nearly identical to those acquired by lower middle-market PE.

Figure 1 shows how median late-stage VC deal sizes have risen sharply toward the $100 million mark, overlapping with lowermiddle-market PE transactions. Perhaps more significantly, Figure 2 below describes how late-stage rounds now represent a growing proportion of total VC activity, clearly highlighting the up-market shift in venture capital. This convergence is compelling investors to reconsider the trade-offs between control, liquidity, and upside in each approach.

The Trade-Offs for Investors

From an investor’s perspective, PE is more enticing. Majority control, predictable cash flows, and a wider range of exit options allow for more effective value creation. Late-stage VC, by contrast, offers little protection. Without control, VC funds have limited ability to influence outcomes or shield investments from market volatility. Even at later stages, venture capital remains highly sensitive to competition and evolving market conditions.

Nevertheless, for LPs with higher risk tolerance or mandates for innovation exposure, VC still offers potential upside, especially if the anticipated new IPO regulations help reopen certain exit channels. Ultimately, the determining factor for any investment is exit strategy, and today PE has the advantage: more control, more flexibility, and more predictability.

Sustainability of Late-Stage Venture Capital

Late-stage venture capital’s reliance on IPOs and M&A creates inherent fragility. Many “unicorn exits” are in reality PE buyouts that use VC as a feeder system. Without structural protections, late-stage VC lacks the mechanisms that make PE resilient.

According to NVCA, total U.S. venture capital exit value fell more than 65 percent from $796 billion in 2021 to $276 billion in 2024, reflecting a severe contraction in liquidity and reinforcing late-stage VC’s dependence on private equity for realizations.

As shown in Figure 3, institutional VC secondary deal activity has plummeted since 2021. This collapse reflects the growing scarcity of liquidity options for VC investors. Without a sudden shift in returns or new exit channels, the current scale of late-stage VC appears unsustainable. Its role may eventually be limited to feeding companies into PE portfolios rather than serving as an independent investment strategy.

The Implications

The convergence of middle-market private equity and late-stage venture capital highlights a strategic realignment in growth-stage investing. For limited partners, lower mid-market PE offers stronger governance, predictable cash flows, multiple exit pathways, and more consistent risk-adjusted returns. Late-stage VC retains potential for outsized gains, but these are unreliable, highly dependent on market conditions, and increasingly subject to competition from PE itself.

In this evolving landscape, private equity emerges as the structurally superior vehicle, while late-stage venture capital faces a sustainability challenge. However, if proposed IPO-market reforms successfully revive public-market access, the role of late-stage VC would be restored as the primary bridge between private innovation and public capital.

Ultimately, as private markets mature and liquidity tightens, the line between PE and VC will blur further. That said, control, governance, and cash flow predictability will remain the dividing line between sustainability and speculation.

Find more posts from the Georgia Tech Venture Capital Club here:

https://gtvc-newsletter.beehiiv.com/

Lead Editor of The GTVC Publication: Sash Vijayakumar