Emergence Capital General Partner Joe Floyd began a recent LinkedIn post with four words: Venture capital is dead. It was quite the proclamation, but what followed was not a gloom and doom outlook. In fact, Joe made the opposite point. Venture Capital is far from dead – but it is evolving.
Headlines are meant to be provocative to get our attention. Thus: “Venture Capital is Dead.” Or “Most VCs Suck at Being VCs” (which…is fair). And then there’s the ominous, “Deepseek could be an extinction-level event for venture capital firms.”
These headlines tell no lies, but they are missing the bigger picture and some important context.
Let me set the record straight: I don’t believe venture capital is dead. In fact, it’s just hitting its stride. What we’re witnessing is actually a fundamental shift in how the game is played. Some players are struggling. But the industry itself? It’s entering what could be its most exciting era yet.
Consider the fact it has never been easier for VCs to find high-growth startups. Companies are sprouting up like weeds. Everyone and their cousin is building an AI startup, and they’re scaling faster than ever before. The previous $1M-$3M range has expanded to $1M-$10M, and what was once $1M-$10M is now $1M-$100M. Keep in mind these organizations are being run off skeleton teams compared to the SaaS of yesteryear.
But here’s the paradox: while it’s easier than ever to find the next big thing, it’s never been harder to get in.
Every venture capital firm – big and small – is chasing the same golden-ticket startups. Thanks to AI-powered sourcing tools and data-driven scouting, every investor knows where the winners are. That means securing a spot on the cap table has turned into a bloodbath. It’s a kill or be killed scenario where term sheets fly like arrows and only the strongest (or best-connected) survive.
The outcome? We’re back in the pre-Covid-style hype cycle. Valuations are soaring. The competition is ruthless. And at some point, all of this will lead to compressed returns.
So, if venture capital firms are shutting down and general partners (GPs) are leaving their posts, is venture capital dying? Circling back to what Joe said – no, it’s not dying. But the industry is undergoing a natural shakeout.
The new era of venture capital is dividing firms into two camps: specialist and capital accumulators.
- Specialist firms go all in on a specific stage, sector, or strategy. They invest before the traction wave hits because they actually know (or convincingly pretend to know) what they’re doing. Firms like Emergence are betting big on expertise over breadth. They have a value-add, not unlike operator immersive capital.
- Capital Accumulator firms take the opposite approach. They play an index-style game, backing as many winners as possible, regardless of valuation. Their strategy is simple: spread bets widely, collect fees, and let AI-powered growth carry their investments to massive exits.
Here’s the thing…both strategies can win. Specialists, if they bet correctly, get in early and see their investments multiply before dilution kicks in. Capital accumulators, on the other hand, just need to be in enough winners to profit from the rising AI tide.
Over the next half decade, venture capital could be out taking a walk in the sun. Having a moment. Every software category is being reimagined with AI, and that’s leading to unprecedented growth rates. The startups that leverage billions of dollars in AI research will scale faster than anything we’ve seen before.
Could AGI eventually disrupt the entire venture model? Maybe. But in the near term, it’s a founder’s paradise and an investor’s dream.
So, is venture capital dead? Not. Even. Close. It’s just evolving. The game has changed, and like any industry, some players won’t survive. But those who adapt will thrive.
Let’s stop with the funeral speeches. Venture capital is just going for a walk.
