Venture 4.0

I had COVID flashbacks last week.

With the VIX peaking just below GFC and COVID levels, we scrambled to review our portfolio and update our theses to include the shock of the new geopolitical policies and tariffs.

However, the elephant in the room waits patiently.

As GPs, LPs, and Founders, we must face our very personal systemic challenge, the reality that we have entered a distinct 4th phase of venture capital triggered by the fundamental breakdown in the entry/exit balance of investing. The implications of this are far more impactful than global politics and economic policy. I’ve been referring to this new era since 2023 as Venture 4.0.

Given the lack of open discourse on the topic, you might think VCs are proverbial boiling frogs, perpetual optimists, or worse, just really good actors.

But Venture 4.0 is a topic discretely being discussed among Partners, debated in private chat groups, and acknowledged with LPs behind closed doors. There is public evidence of this acknowledgment, including the one-off shared charts showing concentrated LP fund flows or the disparity of pent-up private company “value” vs exit volumes.

There’s also the increasing GP departure announcements and the palpable slowing of capital deployment. In fact, Business Insider picked up and reported last year on our annual letter to LPs, in which we introduced the concept of Venture 4.0, highlighting our belief that there will be a material culling of venture firms in the not-so-distant future.

What wasn’t reported publicly was the framework and data we used to arrive at these - at least back then - striking predictions. Several people have recently suggested I share the updated work and so here it is. Hopefully, this will help push forward a healthy, open, transparent conversation on a monumental topic.

TLDR: Venture is forked! Venture 4.0 ushers in two distinct classes of funds: the handful of large capital aggregators that will converge on PE returns and the currently overcrowded community of smaller funds seeking alpha but facing an existential crisis that only those with a pronounced right to win will survive. (Lots of thoughts on this I’m happy to share.)

With change will come innovation and carnage, ultimately supporting the Tech Renaissance we’ve all been working towards.
See Slides