VC Fund gives money back, says the market for mature startups is too weak

Original Article ↗ Hacker News Discussion ↗

Shift from Late-Stage to Early-Stage VC

  • Thread clarifies the fund in question is a growth (late-stage) vehicle; early-stage strategy is largely unchanged or even relatively favored.
  • Rationale: late-stage relies on IPOs and M&A for liquidity; both are seen as weak or mispriced relative to sky‑high 2020–21 marks.

M&A, IPOs, and Exit Bottleneck

  • Many agree M&A and IPOs are slow, but disagree on severity:
    • Some say “M&A is effectively dead”; others say it’s down from 2020–21 but still active in specific niches (e.g., cybersecurity, tuck-ins).
  • Reasons cited:
    • Higher interest rates raising cost of capital and hurting buyouts.
    • Antitrust scrutiny chilling big‑tech acquisitions and making strategics more cautious.
    • Pandemic-era overvaluations: acquisitions or IPOs would require painful valuation haircuts.
  • Result: stalemate—late-stage companies don’t want to sell or raise at lower valuations; buyers don’t want to overpay.

Valuations, ZIRP Hangover, and Down Rounds

  • Strong consensus that 2020–21 was a bubble: huge rounds at 100x+ ARR, companies “selling to VCs” more than to customers.
  • Private valuations are described as “fallen but not marked down” because:
    • Down rounds trigger anti‑dilution and political fallout, disproportionately hurting founders/employees.
    • Many startups prefer to cut costs, extend runway, or use debt/bridge rounds at flat valuations.
  • Some note current late‑stage valuations still don’t reflect realistic exit multiples, making new growth investments unattractive.

Antitrust and the Figma/Adobe Debate

  • One camp: blocking large acquisitions (e.g., Figma) harms the startup ecosystem by:
    • Removing a key exit path.
    • Lowering expected founder/employee upside, reducing startup formation and innovation.
  • Opposing camp: blocking such deals is good for consumers and competition:
    • Prevents incumbents from buying and enshittifying competitors.
    • Startup models built primarily on “get bought by a giant” are framed as socially harmful.

Critiques of VC and Structural Dynamics

  • Several posts argue many VCs are “herd capital,” chasing hype, not funding sustainable businesses.
  • Discussion notes LPs shifting from PE/VC toward private credit; committed but uncalled capital has opportunity costs.
  • Some expect behavior to revert if/when rates fall; others hope this forces a shift toward slower, profitable, durable companies.

Implications

  • Late‑stage founders face fewer “easy” exits and tougher fundraising.
  • Early‑stage and AI remain relatively favored, but may be forming a new bubble.
  • Tech job market and startup formation are seen as tied to how this late‑stage logjam resolves.