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“Big companies have become much bigger,” said Alexandre Lazarow, managing partner at Fluent Ventures. “At the same time, there was an explosion in[small]venture capital firms … So, I think we’ve seen the rise of specialization and the rise of regionalization in the tech sector.”
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Venture Capital industry and Report Among many top executives left old firms.
In Silicon Valley, some high-profile departures include Matt Miller From Sequoia and Sriram Krishnan From Andreessen Horowitz. On the other side of the world, two senior executives Abheek Anand Shailash Lakhani announced in February that they had withdrawn from XV Peak XV Partners (formerly Sequoia’s Captality & Sea).
Turnover is common among juniors in the industry, but it is rare to see senior venture capital partners leave their positions, as these senior positions are often more profitable and difficult to obtain.
I think that over the past decade we’ve seen huge ocean changes that have led to a wider shift in risk-taking (capital industry) into asset management, and I think that’s actually the crux of the problem.
Rick Zullo
Founder and Managing Partner, Equal Enterprise
“There are definitely more departures happening. I think many people have not announced yet, but many are in progress,” CNBC.
CNBC Look at some of the reasons behind them.
Continue to succeed
The reasons for these departures include the perception of some investors that many large companies are slow in decision making and that funds focus on increasing the pool of funds they manage rather than working with promising founders.
Some investors in the camp also said they are taking advantage of major changes in the industry, which brings benefits to larger companies.
Over the past decade, as large traditional companies have attracted exponential dollars worldwide. According to 2024, only nine venture capital firms raised $35 billion, or 50% of the total capital collected by U.S. funds. tone.
“I think we’ve seen huge ocean changes over the past decade, which has led to the risk taking (the capital industry) becoming more broadly into asset management, and I think that’s actually the crux of the problem,” Zullo said.
“(Visiting firms) are now expanding to become more like … Blackstone or Goldman Sachs … This has led to cultural dissonance between people who want to be pure Play Venture Capital and people who want to be asset management companies,” Zullo said.
As traditional companies grow, some senior partners say this keeps them away from their initial passion for venture capital.
“Big companies have become much bigger,” said Alexandre Lazarow, managing partner at Fluent Ventures. “At the same time, there was an explosion in[small]venture capital firms … So, I think we’ve seen the rise of specialization and the rise of regionalization in the tech sector.”
Lazarow said that as more and more funds are concentrated in some elite companies in Silicon Valley, some mature investors choose branches and start their own funds, where they can have more control over their decisions and invest in things they have firm belief in themselves.
He said it became easier for individuals to start their own venture capital funds with the rise of tech platforms such as angelists and Kata. It is worth noting that limited partners – or those who invest in venture capital funds – have also become “more comfortable” investments in solo managers today, he added.
“In some of these large-scale companies, there are a bunch of incredible venture capitalists who have had huge success and they now decide that they don’t want to be asset managers … they don’t want to deal with bureaucracy or corporate structure,” Zullo said. “They just want to go back to the basics.”
Bilal Zuberi is one of them: he Announce He left Lux Capital in December after working as a general partner for about 12 years. Today, he is starting his own venture fund called Red Glass Ventures, which focuses on investing in early stage companies.
Then suddenly, the musical chair stopped. The IPO market is closed, the exit (before) declines, and the M&A has decreased, so I think many limited companies (on a relative basis of the category have too much money and not enough liquidity to come back.
Alexandre Lazarow
Management partners, fluent business
“When you’re a very big funding, it’s hard to focus on the early stages of senior partners.” Zuberi told CNBC that seed and A-series startups are often left to young team members, and that’s not “the best product for founders.”
“The founders want to work with senior experienced investors who can sit on the board…and provide real advice…and frankly, it’s hard to do in larger companies,” he added. “If I could write an early conviction check, I would have high ownership, and if… the company does a good job, that’s the real alpha reward.”
Keep moving from failure
But not all departures are voluntary.
“There are a lot of people who are very silently driving these companies out of these companies … The consolation prize for not allowing the general partners of these companies is to make them emerging managers and serve new companies,” Zullo said.
According to industry insiders, it is more difficult to see ROI in and outside Silicon Valley as the industry has been experiencing a significant economic downturn.
This is largely Interest rate policy Implemented by the Federal Reserve, most recently during the 2020 pandemic (setting the price at zero), which allowed borrowing cheap and incentivized investors to deploy more money to start-ups and other riskier assets.
As a result, the startup ecosystem surged in venture capital during the Covid-19 pandemic, but when interest rates recovered 2022investors become more cautious and realize that some startups may already be Overestimated.
“I think one of the challenges that have been faced with limited partners in the past few years is that with a large number of IPOs, the returns are much faster. People are getting back the money,” Lazaro said.
“Then, suddenly the music chairs stopped. The IPO market closed, exited (forward), and mergers and acquisitions were reduced, so I think a lot of LPs (with too much money on a relative basis of the category) and (and) not having enough liquidity back.” As a result, the venture capital industry took a hit.
Impact on portfolio companies
One often unexpected consequence of partners leaving their funds is that their portfolio companies may be affected. So how does the outbound export of these venture capital affect startups? The short answer is that it depends.
According to industry insiders, senior partners typically hold board seats in their portfolio companies and become long-term mentors to founders, but this is not the case for some companies.
“Our three portfolio companies have at least one board member delivered, i.e. the person left the company, and we have multiple companies that have lost multiple companies (board members),” Zullo said.
“I think the best way to do this is to be very thoughtful about the transition with the portfolio, CEO and founding team,” Lazaro said. “It’s important that the company is not orphan in a venture capital fund and has continuity.”
When a startup has a strong board champion, leaving a negative impact on portfolio companies, and their company has a lot of swings. Industry insiders say that when these partners are replaced by more junior high school people, it could undermine board meetings and company decisions.
Additionally, companies that want to raise more money through subsequent rounds may be affected when existing investors make further investments in the company, while their original champions are no longer guaranteed to the company nearby.
The maturity of a startup can also play a role in the impact of founders.
“It depends on the stage of the company. The later you are, the less likely you are to need any guidance because you are a subject matter expert.”
“Most (partners) are not entirely operators,” Tan said. Therefore, founders may not rely on them for guidance in the first place.
TAN said that while early-stage companies may be affected because they often require more guidance from their partners or board members, late-stage companies have more experienced founders and often have many other board members to rely on.
