Reid Hoffman, a co-founder of LinkedIn and a seasoned venture capitalist, is no longer the visible presence of the investment firm Greylock. Michael Moritz, who has been a prominent figure at Sequoia Capital for 38 years, officially separated from the firm last summer. Jeff Jordan, a top investor at Andreessen Horowitz for 12 years, also left in May. These individuals are part of a group of well-known Silicon Valley investors who are exiting the venture capital scene after a profitable 15-year period for the industry.
Many others are following suit. Investors at Tiger Global, Paradigm, Lightspeed Venture Partners, Emergence Capital, and Spark Capital have all announced intentions to take a step back. Foundry Group, a venture firm in Boulder, Colo., that has supported 200 companies since 2006, announced it would not raise another fund in January. The continuous stream of departures has created a sense that the venture capital industry, valued at $1.1 trillion and investing in young, private companies, is undergoing a transition period.
“We’re at a tipping point,” said Alan Wink, a managing director at EisnerAmper, a firm that provides advisory services to venture capital firms. While there have been previous waves of retirements, he noted that the current one stands out.
This changing landscape presents an opportunity for new investors to rise to prominence and potentially alter the power dynamics in Silicon Valley. It may also impact how young companies choose which venture firms to approach for funding. However, the new generation of investors faces a more challenging environment due to fewer significant exits, which are essential for establishing a strong reputation in the industry. This difficulty in achieving big wins also makes it harder for venture capital firms to raise funds.
The previous generation of investors, including Moritz, Hoffman, John Doerr, Jim Breyer, and Bill Gurley, made successful bets on consumer internet start-ups like Google, Facebook, Uber, and Airbnb, which grew into giants. Today’s aspiring venture capitalists are waiting for their version of these game-changing successes. However, with highly valued start-ups like OpenAI showing no rush to go public or be acquired, the road to significant victories may be longer than expected.
While established figures like Vinod Khosla, Marc Andreessen, and Peter Thiel continue to make investments and wield influence in the industry, many others are stepping aside. The 15-year period of prosperity for venture capital has recently taken a downturn, prompting some investors to reevaluate their involvement in the sector.
The rapid growth of venture capital over the years has led some investors to reconsider their roles. The industry has evolved into a more specialized and professionalized field, prompting seasoned investors like Mike Volpi to step down from Index Ventures. As venture funds become larger and more professional, the traditional concept of high-risk, high-growth investments is shifting towards a broader notion of “tech exposure.”
In light of these changes, some investors are finding it difficult to maintain the same level of success and are reassessing their strategies. For instance, Manu Kumar of K9 Ventures has decided not to raise a new venture fund due to the challenges of the current investment landscape. As companies are expected to build sustainable businesses rather than rely solely on high valuations, investors like Kumar are taking a step back to reassess their strategies before moving forward.
