It's no secret: Venture capitalists are . A slowdown in VC deal , which started in late 2022, has continued into the first quarter of this year, accounting and advisory firm EisnerAmper in an analysis published on June 16. You've heard this story before: inflation, interest rate uncertainty, and low M&A volume are having on the investing environment.
Venture capital has cyclical fluctuations, but Scott Stanford, a cofounder and partner at ACME Capital, an early-stage VC firm, thinks something more meaningful is underway. "It's not crazy to think half the VC firms that were actively investing in the last decade will be sidelined and eventually collapse," he wrote in an email to BI. The first wave will die off in the next five years.
Ten years from now, the damage will be evident, he said. Some simple back-of-the-napkin math paints a grim picture. In a chart compiled by Stanford and shared with BI, by 1990, there were 300 VC firms overseeing $17 billion in assets.
Over the last two decades, those numbers went through the roof. Now, there are 3,000 VC firms overseeing $1.2 trillion.
By contrast, the increase in exits is modest at best. By 1990, VC-backed IPOs totaled $12.7 billion.
By 2021, that increased to $60.1 billion. And it's a similar story with VC-backed M&A deals.
The venture industry got ahead of itself, in other words: The proliferation of firms and the money they're managing is not supported by the financial value they're creating. "As the venture capital industry ma.