VCs Are Sitting Tight On Top of a Big Cash Pile
Potential investors have pivoted toward less-risky bets that will hopefully deliver results even sooner.
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Venture capitalists have a new motto: nothing ventured, nothing lost. They’re sitting on more than $300 billion of cash.
Know When to Walk Away
Between 2020 and 2022, VCs managed to raise a record $435 billion, but so far, they’ve deployed only about half of that, The Financial Times reported on Tuesday. So what happened? It’s not like there’s a dearth of plucky young companies touting their expertise in blockchain or AI or some other disruptive technology. But as Wired noted earlier this month, the days of ultra-low interest rates and outsized investment returns on startups are a thing of the past.
VCs have now pivoted to safer bets on more established companies or those already in their portfolios as opposed to frivolously handing out seed money:
- Last year, Thrive Capital invested $1.8 billion into fintech group Stripe, which was founded in 2010. It’s also leading a purchase of employee stock at ChatGPT-creator OpenAI, the FT reported.
- Doing, well, not much, can be tricky for VCs, too. One Silicon Valley venture capitalist told the FT, “Investors don’t usually like to put pressure on VCs to spend money, but if you’re entering your third year of not doing anything, they’re starting to ask ‘what are my fees for?’”
Fallen Angels: As a result of VCs playing it safe, startups are folding at a scary pace. Last year, about 3,200 startups that collectively raised more than $27 billion in VC funding had gone out of business, The New York Times reported. Some of those include home construction group Veev, health automation service Olive AI, and who could forget WeWork’s bankruptcy filing? But Silicon Valley doesn’t stay dead for long. The next “Uber for cats” is likely right around the corner.