Number of US Venture Capital Firms Falls as Cash Flows To Tech's Top Investors (ft.com)
- Reference: 0175815663
- News link: https://news.slashdot.org/story/25/01/02/0744204/number-of-us-venture-capital-firms-falls-as-cash-flows-to-techs-top-investors
- Source link: https://www.ft.com/content/7a787423-9466-4e55-8c0e-8811cfe44dd3
[2]non-paywalled source
, as risk-averse financial institutions focus their money on the biggest firms in Silicon Valley. From a report:> The tally of VCs investing in US-headquartered companies dropped to 6,175 in 2024 -- meaning more than 2,000 have fallen dormant since a peak of 8,315 in 2021, according to data provider PitchBook.
>
> The trend has concentrated power among a small group of mega-firms and has left smaller VCs in a fight for survival. It has also skewed the dynamics of the US venture market, enabling start-ups such as SpaceX, OpenAI, Databricks and Stripe to stay private for far longer, while thinning out funding options for smaller companies.
>
> More than half of the $71bn raised by US VCs in 2024 was pulled in by just nine firms, according to PitchBook. General Catalyst, Andreessen Horowitz, Iconiq Growth and Thrive Capital raised more than $25bn in 2024. Many firms threw in the towel in 2024.
[1] https://www.ft.com/content/7a787423-9466-4e55-8c0e-8811cfe44dd3
[2] https://slguardian.org/us-venture-capital-firms-dwindle-as-funding-consolidates-among-silicon-valley-giants/
Seems deeply unhealthy... (Score:3)
As layoff-hit industries go it's hard to muster too much sympathy for VCs; but (aside from vigorous consolidation generally not being a good sign for a well functioning competitive market) it seems like this presents a distinct danger for the nature of competition, or lack thereof, downstream of the VCs.
Unlike more generic lenders, who traditionally care about your risk profile and presence or absence of collateral; but are otherwise mostly interested in either approving or rejecting your loan application and then getting paid in due time; VCs are typically more hands-on and more selective in their evaluation of prospective funding candidates; which seems like a situation where who does or doesn't get funded is likely to become as much about the potential impact on companies a VC outfit already has a stake in as it is about the viability of the proposed business.
We've seen some similar things already, with the genre of companies that are basically founded specifically to prod one of the deep pocketed incumbents into a defensive buyout; but with fewer VCs and VCs retaining their ownership stakes longer before companies go public we'll presumably see a further elaboration of that; with companies either being starved to protect already-funded candidates from having to deal with them; or being invested in specifically to obtain the necessary leverage to snap them up for absorption by another company in the portfolio on favorable terms.
This is going to seriously impact the types funded (Score:1)
Big VCs need to deploy large amounts of cash to their target investments.
There are only so many industries that can scale to be worth billions. So only firms that can scale exponentially will get funded by these massive funds.
Little startups that just need $5million and then get acquired for $50million arenâ(TM)t worth the effort to get a return on a $1billion fund.
So weâ(TM)ll see otherwise good startups falling into the funding gap between angel/seed and series A.
Which will push back on angels a
When the tide is out.... (Score:2)
Everyone can see who was swimming naked.
In years of cheap interest rates everyone was looking for a better return for their cash. Hence anyone could open a VC and get funded and play the M&A game. These days with interest rates up you have to have a solid track record in order to attract cash.