Amid the toptechtrends.com/tag/svb-2023-crash/”>Silicon Valley Bank-led chaos of the last few days, Y Combinator made an toptechtrends.com/2023/03/13/y-combinator-cuts-nearly-20-of-staff-scales-back-growth-stage-investments/”>intriguing announcement: It’s pivoting away from late-stage investing. It won’t be the last venture group to pull back from an expansion of its traditional investing remit.
During the COVID-19 pandemic’s first years, the pace at which venture capital firms could raise money expanded. PitchBook data indicates that U.S. venture capitalists saw their capital inflows more than double from $23.5 billion in 2012 to $51.4 billion in 2016. But investing cohort was just getting started: It further bolstered its fundraising from $60.5 billion in 2018 to $154.1 billion in 2021 and $162.6 billion in 2022.
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This dramatic rise in capital available to venture investors had a number of interesting impacts on the startup market. First, startups were able to raise toptechtrends.com/2021/12/07/agentsync-raises-75m-for-its-insurance-focused-api-business/”>more, more quickly, more frequently. Some startups raised two or even three times in a year. This led to dramatic markups and paper valuations that today no longer align with reality.
toptechtrends.com/tag/the-exchange/”>toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg” alt=”” width=”300″ height=”300″ srcset=”https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg 900w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=150,150 150w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=300,300 300w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=768,768 768w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=680,680 680w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=32,32 32w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=50,50 50w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=64,64 64w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=96,96 96w, https://toptechtrends.com/wp-content/uploads/2021/10/exchange-banner-sq-blu-plus.jpg?resize=128,128 128w” sizes=”(max-width: 300px) 100vw, 300px”>Another result of the boom in venture fundraising was the ability of firms to expand their investing footprint. One trend that lasted for years during the final stage of the last startup boom was toptechtrends.com/2020/01/17/the-paradox-of-2020-vc-is-that-the-largest-funds-are-doing-the-smallest-rounds/”>late-stage investors going early-stage. The logic here was that if large venture funds could invest a round or two earlier, they could get far greater ownership of great companies at a lower average per-share cost. This, in time, would lead to simply nasty returns.
To pick some examples of this effort, recall that Andreessen Horowitz, a firm that has raised 12 funds with more than $1 billion in them during its life, per Crunchbase data, announced toptechtrends.com/2021/08/27/andreessen-horowitz-just-rolled-out-a-400-million-fund-thats-expressly-for-seed-deals/”>a seed effort in 2021 and toptechtrends.com/2022/04/18/andreessen-horowitz-a16z-start-seed/”>a pre-seed endeavor in 2022.
toptechtrends.com/2023/03/14/y-combinator-late-stage-investing-interest-rates/”>Rising interest rates are putting VCs back in their lanes by toptechtrends.com/author/alex-wilhelm/”>Alex Wilhelm originally published on toptechtrends.com/”>TechCrunch
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