More venture firms than ever are becoming zombies.
In 2023, 15,303 unique investors participated in at least one VC deal in the US. But this year, that figure has dropped to 11,425 investors, according to the Q3 2024 PitchBook-NVCA Venture Monitor.
That means that 25% of the VC investors active last year have paused new investments. The pullback by crossover investors accounts for only a small part of the decline: 258 unique crossovers have done at least one VC deal in the US this year, compared to 292 in 2023.
The remarkable dip in VC players, which began last year, signals that a significant consolidation of the venture market is underway. The number of unique investors this year is the lowest in a decade.
So-called zombie funds can’t raise money from LPs or write checks to new startups. Unlike the companies they back, which go bankrupt when they run out of money, GPs tend to disappear quietly. By overseeing their existing portfolio and collecting management fees, these firms can operate for years as zombies.
When the venture market took a turn over two years ago, industry watchers began to warn of an impending rise in these funds.
One prominent voice, then-CEO of Techstars Maelle Gavet, predicted in a 2023 CNBC interview that: "[it] could be as high as up to 50% of VCs in the next few years that are just not going to be able to raise their next fund.”
Earlier this year, a PitchBook survey of US venture GPs found that 13% of partners weren’t planning on raising another fund and another 27% of partners had delayed their plans.
Across the industry, there are indicators that firms are shrinking.
Last week, two senior partners at Initialized Capital—including former co-founder of Rent the Runway Jennifer Fleiss—left the firm as a result of a restructuring. In June, UK-based Octopus Ventures let go of eight people from its team of investors.
Featured image by Julia Midkiff/PitchBook News
