• CNBC, Friday, March 13, 2009 9:33 AM

At the Montgomery Tech Conference in Santa Monica, California this week, the buzz seems entirely disconnected from the grim reality on Wall Street. The conference is coordinating over one thousand meetings between potential investors and startups--twice the number scheduled at the conference last year.

While it's much harder to raise new capital these days, private equity and VC players still have billions of dollars--raised over the past few years--to invest. The tighter capital pool is pushing everyone to adjust. Investors are demanding profitability and are investing smaller amounts. They aren't thinking about IPOs. Instead, the exit strategy is a sale to an industry leader, and they're willing to hang on for longer.

The Carlyle Group's Growth Capital Fund, for instance, has some $300 million left to invest, which it plans to do in $30 million increments. Its target companies have revenue in the tens or hundreds of millions of dollars and the potential for real growth, Bob Grady, Carlyle managing director, says he's increasingly investing in or acquiring companies that are complementary for the company's current portfolio companies. His preference is to merge two companies to create a real contender in a given industry.

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