Many VCs have stopped investing this year
Venture capital dealmaking has fallen sharply from its 2021–2022 peak, with many observers noting this is largely a reversion to pre‑pandemic levels rather than a total collapse. Commenters link the earlier spike to ultra‑cheap money, inflated valuations and a glut of mediocre funds and startups, and argue that today’s tighter market is pushing VCs toward bridge rounds for existing portfolio companies, lower valuations, and a stronger focus on revenue and capital efficiency. The shift is seen as both a potential healthy correction and a source of pain, with expectations of more layoffs and shutdowns but also fewer speculative bets and copycat businesses.
Overall trend & data interpretation
- Many commenters say the “drop” is mostly a reversion from a Covid-era spike back to 2019–2020 levels, not a collapse of VC as such.
- Others argue the drop is still newsworthy since the spike itself was news and the normalization was not guaranteed.
- Some question the article’s framing: “active investors” = anyone making ≥2 deals, likely including angels and family offices, not just institutional VC funds.
- One VC says nearly all seed and Series A firms they know are still investing, just more slowly.
Media framing
- Several posts criticize business journalism for sensational, short-term, q/q comparisons and neglect of pre-Covid baselines.
- Others defend that the article includes a multi‑year chart showing the spike and context.
- Broader discussion: media has always been attention-driven; digital analytics and A/B testing intensify clickbait incentives.
Drivers of Covid spike and 2023 pullback
- Explanations for the spike: massive monetary expansion, near‑zero rates, and money seeking returns in tech, which could keep operating during lockdowns.
- Explanations for the pullback: higher rates making “risk‑free” yield attractive, tighter financing markets, and VCs reserving cash for existing portfolio companies.
- Some say many startups were funded only because money was cheap, including speculative areas like crypto.
- Debate on whether the “cheap money era” is over; Fed talk of cuts suggests to some that low-rate reflexes remain.
Bridge rounds and portfolio triage
- Multiple comments highlight bridge rounds from existing investors (often unannounced) as a big, underreported part of activity.
- Motivations cited: avoid down rounds and markdowns, protect earlier investors and founders, and back teams still believed in.
- Others see risk of sunk-cost behavior, but several argue VCs usually bridge only companies they genuinely rate.
Founders’ on-the-ground experience
- Reports of: more automatic “no” decisions, longer due diligence, lower valuations (especially for overvalued seed companies without PMF), and insistence on 24‑month runway.
- Shift from pure growth metrics to revenue, capital efficiency, and more conservative projections.
Impacts on jobs and innovation
- Some celebrate a purge of “mediocre VCs” and copycat or low‑substance startups, expecting less talent wasted.
- Others warn fewer VC-backed firms means fewer tech jobs and a smaller pool of experienced startup engineers.
- Views diverge on innovation: higher rates may push focus to real businesses, but may also starve capital‑intensive moonshots and green projects that previously benefited from ZIRP.
Normative views on VC
- Some see VC as socially useful risk capital that funds jobs and innovation, despite waste.
- Others view recent years as a “grift,” with capital misallocated to unproductive or distortive ventures.
- One strong anti‑VC view claims VC-backed firms are net negative for society; a response notes those same firms have driven up developer salaries, so a VC crash would hurt workers more than financiers.