The Rabid Capitalist

Professor Glenn A. Okun

NYU Stern School of Business

July 28, 2023

Cutbacks have hit the venture capital industry.  Consider the state of Sequoia Capital.  A year ago, as loan rates increased and wealthy investment rounds became more difficult to find, Sequoia advised its portfolio firms to trim the fat. It now seems to be following the recommendations it gave itself, firing investment professionals including partners.   Y Combinator has also made significant layoffs. 

The extent to which venture capital firms are impacted may vary based on when and how much they most recent raised in capital, but this is an issue that affects the whole industry.  This year’s funding for venture capitalists is on pace to be the lowest since 2017.

Excluding the artificial intelligence space, the startup landscape has been dismal.  A focus on profitability has replaced sky-high valuations and an abundance of cash.  VC spending was cut in half from the previous quarter.

Retrenchment in the venture capital industry must be factored into a founder’s assessment of the attractiveness of these very expensive financing offers.  It should be expected that layoffs will affect an investor’s ability to add value to ventures, essential for venture capital to be accretive to existing shareholders.