The venture capital landscape has dramatically shifted over the past decade, attracting countless college graduates and MBAs eager to discover the next big success like Airbnb or Uber. Initially, the industry was buzzing with excitement, as aspiring VCs tirelessly networked and hunted for job opportunities, dreaming of becoming the next Michael Moritz.
However, in the last two years, the energy that once fueled the sector has waned, leaving investors—ranging from analysts to partners—feeling increasingly disillusioned and frustrated.
In 2021 and 2022, venture capital was at its peak of popularity, likened to industries like fashion and entertainment by one early-stage associate. The zero-interest environment and pandemic-driven trends swelled the ranks of VCs, with a flood of capital chasing the high returns promised by venture investments.
Existing companies broadened their horizons, early-stage firms aimed for rapid growth, and private equity houses and hedge funds ventured into crossover funds. Corporations flush with record profits sought strategic investments, and numerous new firms were born as investors branched out on their own.
Today, however, the market downturn has exposed the vulnerabilities of the venture capital industry. Rising interest rates, delayed IPOs, and declining public markets have all taken their toll. What once seemed like an unstoppable growth trajectory for venture firms has now reversed, with many shrinking in size. According to PitchBook, venture capital firms are expected to raise less than $200 billion in 2024—a stark 48% decline from the industry’s peak in 2021.
For example, Greycroft recently parted ways with five investors after falling short of its fundraising target by about 40%, as reported by The Information. Similarly, YCombinator laid off 20% of its staff and scaled back on growth-stage investments and remote programming, according to TechCrunch.
In the bullish market of the past, frustrations were easier to overlook. Now, however, these issues have become deal breakers, as investors confront limited growth opportunities. The fierce competition for deals has only intensified the daily grind and exacerbated office politics.
In discussions with 11 partners, principals, and associates across various VC firms, Business Insider uncovered widespread dissatisfaction, with many individuals requesting anonymity due to fear of reprisal.
The Zero-Sum Nature of Venture Capital
Layoffs in venture capital have been more widespread than publicly acknowledged, according to Will Champagne of recruitment firm SCGC Search. Behind the scenes, some senior and mid-level investors have been quietly informed that they have six to 12 months to find new jobs. For junior talent, many firms are opting not to promote after the typical two-year program, instead encouraging them to explore opportunities elsewhere.
Even those who remain in the industry find that venture capital has lost some of its allure. With fewer promotions available, career advancement has become increasingly limited.
While becoming a partner has always been challenging, the early years of the pandemic offered relatively more opportunities as deals flourished and firms raised larger funds—a classic "bull market phenomenon," as one early partner described it. Now, in a contracting market, promotions are rare unless someone leaves, and even then, promoting another investor often means redistributing the carry.
"It’s probably harder to get promoted today than it was when I was doing it," the early partner reflected. "There are more people at the top, and even when companies say they’ll promote someone, the bar is set incredibly high—you have to find the next Snapchat or something. It’s kind of unrealistic."
Unrealistic expectations are commonplace in venture capital. One Bay Area partner noted that firms often set targets and timelines that they never intend to meet. "You’re never going to hit a metric that satisfies you, and you’re never going to get a timeline that makes you happy. You just have to live with the uncertainty."
This environment forces investors to advocate for themselves, sometimes aggressively. "People have to threaten to leave and get outside offers just to force their firm to promote them," said one AI investor. Even when someone performs well, they might not be promoted if others are ahead of them. "Maybe someone meets all the quantitative metrics, but that doesn’t guarantee they’ll be first in line," the AI investor added.
The process is often highly subjective. One former VC shared that short-term judgments were based on personal relationships and perceptions. "I had to adapt my communication style to make sure my partners liked me and to ensure the relationship was as seamless as possible," the ex-VC explained.
Female investors, in particular, found this dynamic frustrating. "I knew a lot of women who just didn’t have the patience for that kind of nonsense," the ex-VC added.
In the end, promotions can sometimes come down to sheer luck. One investor shared an extreme example where someone was promoted simply because the firm accidentally changed their title to "partner." After receiving a flood of inquiries due to the title, the firm made the promotion official. "Now there’s no room for anyone else in the fund to become a partner."
Even at the top, it’s not all sunshine and roses. Poor fund performance has rendered carry essentially worthless, said one growth-stage executive. Many investors received meaningful carry in funds a few years ago, but those funds have since underperformed due to overvalued companies during the pandemic. "It may be a long time before they see any carry dollars, possibly not until the next fund," the growth-stage executive explained.
"And then you start questioning how long you’ll have to stay in venture capital before you see any significant financial return," the executive added.
The Competitive Grind
The intense competition for deals in venture capital breeds daily frustrations and office politics.
Despite the surge in venture capital post-pandemic, the "number of great companies has remained the same, if not decreased," the AI investor observed. "There’s just a lot of capital chasing the same few deals at the same time."
Many firms are pivoting toward AI, with companies like a16z merging teams to focus on the sector. However, investors who were hired to specialize in areas like consumer, fintech, crypto, or healthcare are now being pushed to invest in unfamiliar sectors, according to one venture recruiter.
AI deals, in particular, are fiercely competitive, often forcing companies to make decisions at breakneck speed. For example, Haize Labs received multiple term sheets for its early-stage round within a short timeframe. "It’s much harder to hit the target when there’s so much competition," said one AI investor.
The heightened competition has also increased the demand for sourcing. Firms are now expecting junior investors to meet with dozens of companies each week, noted one Bay Area partner. However, this volume of meetings doesn’t necessarily translate into better investment decisions. "You can spend all day meeting with bad companies," the partner added.
The sourcing process itself can be grueling. "When the market is slow, like it is now, you can end up spending six hours a day cold emailing people and going through prospect lists," said one growth-stage employee. "If I have to write another cold email to a founder about how excited I am about what they’re doing, I might lose it."
Tough market conditions and scarce deals have also led to increased infighting within firms. Investors are increasingly poaching each other’s deals, said a Bay Area partner. Credit theft is rampant among colleagues, including at the partner level, and between different tiers, such as directors and partners.
This rivalry extends into deal execution. One multi-stage investor recounted instances where partners would sabotage deals led by junior VCs for arbitrary reasons, such as disliking the founder’s personality.
Junior investors, too, have engaged in undermining deals. Some have even derailed deals they worked on by convincing a competing partner not to believe in the investment, despite what they wrote in the investment memo, according to one growth-stage executive who witnessed this at a previous firm.
However, such internal competition—including deal theft and sabotage—has always been part of the venture capital culture. "It would be naive to think that VCs don’t compete with their own partners," said one former VC. "This is an individual sport, not a team sport."
The Road Ahead
As the market continues to correct, more churn is likely within the industry. "I know a lot of people who want out," said the growth-stage executive. "But the problem is, it’s a market-wide issue for LPs, and there aren’t many good places to go that don’t have the same problems."
Senior and mid-level investors involved in fundraising are particularly feeling the pressure, according to Champagne. "I’ve seen about four times as many inquiries from principal and partner-level candidates looking for new roles in the last 18 months compared to a few years ago."
Some are ready to leave venture capital entirely. "I’ve had to reconnect with my investor network," said the early-stage partner, citing the exodus of peers. Another principal added, "I’ve had several friends leave the industry."
While venture capital can be intellectually stimulating, many investors are questioning the real impact of their work. "I’ve realized that at this stage in my career, where I want to be grinding and getting things done, venture isn’t the place for that," concluded one growth-stage associate.
