VCs Adjusting

The 2020 to 2022 vintages for venture capital are nothing to write home about, yet. The only solace for many VC funds, large/small, new/old, and early/late stage, is that everyone is more or less in the same boat.

Most funds I’ve spoken to now have a “higher bar” for what they want to invest in.

Growth/late-stage funds are generally in a holding pattern now. But there's a noticeable "flight to quality" in investments, resulting in a frenzy of 2020-2022-style pricing for select startups for their series A to B+ financing. Because series B+ rounds are frozen, many late-stage funds are now hunting for seed and series A companies to invest in to stay active.

In the early stages, some emerging funds are reducing their follow-on pro-rata allocation to increase exposure to net new 2023 investments as a hedge against their 2020-2022 investments. Some have gone a step further, reducing future management fees to have more shots on goal for the coming year.

Tech startups weren't the only ones forced to course-correct. Funds are making adjustments as well.