London-based VC firm Octopus Ventures is cutting its investment team by eight as it shifts focus to portfolio companies over new investments.
The layoffs mainly impact the team’s junior members, including associates. The investment team will be reduced to 41 employees.
“We have made the difficult decision to adjust our team to align with current market conditions,” said an Octopus spokesperson, who confirmed that it had begun the process of informing affected staff. They added, “As a fund manager, we respond to economic conditions by prudently balancing investments in new companies while continuing to support the best-performing businesses in our portfolio.”
Like many of its peers, Octopus Ventures has significantly slowed the pace of its investments amid a challenging environment for VC dealmaking. At its peak in 2022, the firm completed over 90 VC deals, according to PitchBook data, compared to 61 last year.
The firm has also had to write down the value of some of the investments made through its listed investment trust, Octopus Titan VCT. In April, the firm reported that the trust’s portfolio value fell by £132 million (about $167 million) in 2023.
Layoffs at VC firms have historically been rare but have become more frequent in the past year. In 2023, Sequoia shed one-third of its talent team while Y Combinator let go of 17 employees earlier in the year. Startup accelerator Techstars laid off 20 employees in January.
Years of swelling assets in the VC industry and easy fundraising led firms to recruit heavily during the peak of the VC bubble. But with the VC downturn in 2022, many investors retreated from dealmaking.
According to PitchBook data, the number of active investors in European VC has shrunk by over 50% in the past year, while 38% of VCs disappeared from dealmaking in the US in 2023. With fewer investments, some firms no longer need as many employees to source and execute deals.
Fundraising has also declined dramatically in the past two years. In Europe, VC fund count hit its lowest point in a decade last year, while the US fared only slightly better. With the decline in revenue from management fees, VC firms may need to cut costs to maintain operations, leading to layoffs.
Octopus added that the Titan VCT team will invest more capital in “building value” in the existing portfolio going forward but that the firm is still actively investing through its B2B software fund and pre-seed fund.
Among the deals that Octopus Ventures has participated in this year are those for New York-based behavioral therapy specialist Pelago’s $58 million Series C and UK-based biotech startup LabGenius’ £35 million Series B.
Featured image by Andrii Yalanskyi/Getty Images
Learn more about our editorial standards.
