We’ve been hearing a lot about buyout funds recently, and now there’s evidence to suggest they may be replacing the valley’s hundreds of smaller venture capital firms as the primary backers of companies that go public. While we saw 22 Silicon Valley venture-backed companies go public last year, we’ve only seen one local company go public so far this year — Threshold Pharmaceuticals — which was relatively small, at $37.33 million. Could there be a link?

Well, take note of this VentureWire story (sorry, subscription req), which documents how larger buyout funds — many of them hq’d on the East Coast — are behind more of the IPOs coming to market these days. True, this may be temporary because many of the companies going public operate in more mature industries, and the trend may reflect how much money is sloshing around. These companies are getting high valuations in the public markets. Meanwhile, the costs of complying with Sarbanes Oxley laws have also put the kibosh on smaller, valley-based start-ups. Venture investors in these companies are avoiding those costs, and preferring to sell these start-ups to larger companies — something we’ll be talking more about here shortly.

Here’s a snippet of the VentureWire story:

…instead of venture capitalists cashing out in the IPOs, the deals today are backed by large private-equity firms such as Blackstone Group or Kohlberg Kravis Roberts & Co. Such firms in the past several years have snapped up increasingly larger companies for their portfolios thanks to the buying power they have achieved with low-interest debt, and are eager to turn them into IPOs to recapture some of their investment.

This quarter that trend toward private-equity-backed IPOs has continued. Fourteen of the 40 U.S. IPOs that came to market so far this year, or 35%, were backed by large private-equity firms such as Blackstone, compared with 34% a year ago and 31% in the final quarter of 2004, according to deal tracker Dealogic.

In contrast, just seven venture-capital-backed IPOs have started trading this year, compared with 10 in the first quarter of 2004, according to data from VentureOne, a research firm owned by Dow Jones & Co., publisher of The Wall Street Journal.

Postscript: Meanwhile, this New York Times story is a bit odd. It’s about whether Silicon Valley has lost its edge, similar to Detroit — but is written in Scottsdale, Ariz.