These funds expect lower returns than venture capitalists, so they take less risk by investing in more mature companies that are safer bets.
"If you've got funds and you need to basically deploy pretty big chunks of capital, wouldn't you rather invest in things that seem like a sure thing?" said Aileen Lee, founder of Cowboy Ventures. In a widely read blog post on tech companies worth more than $1 billion, Ms. Lee called the group the "Unicorn Club."
Last May, Evernote, a company that makes a productivity app, raised money that drove the valuation significantly higher.Just seven months later, interest from Valiant, a hedge fund based in San Francisco that also invested in Dropbox, and AGC Equity Partners' affiliate m8Capital, elevated the valuation to a reported $2 billion.
For those venture firms that aren't able to invest in the top companies, the inclination is to spread out their investments among a broad pool of companies, many of which are derivative.
(Read more: The most-overlooked metrics for valuing tech firms)
When the deals site Groupon was thriving,for example, big investors including Amazon poured money into rival Living Social. For a time, the company was valued at more than $1.5 billion. But in February, Living Social took $110 million in new funding at a lower valuation, a so-called down round.
"These funds have a lot of money and push money out into whatever looks hot," said Alexander Ljungqvist, professor of finance at New York University."It's like throwing spaghetti at the wall and seeing what sticks."
With so much cash in the bank, many companies that in previous cycles might have been prompted to sell or go public can now stay private longer — a strategy they saw Facebook use with success.
"That's why you're seeing LinkedIn,Twitter, etc., going out at $20 billion valuations instead of a billion like eBay or Amazon," said John Backus, founder of New Atlantic Ventures and a member of the National Venture Capital Association board. "There's a lot more value accruing to the private investors."