The venture capital (VC) industry is experiencing a significant shift, with numerous partners departing established firms to launch their own funds or join emerging ones. This trend, often referred to as the “partner exodus,” is reshaping the landscape of venture capital.
Key Drivers Behind the Exodus:
- Desire for Autonomy and Specialization: Many partners are seeking greater control over their investments and the flexibility to focus on niche sectors. For instance, Sarah Guo left Greylock to establish Conviction, an AI-focused venture firm, highlighting a move towards specialized investment strategies. citeturn0search13
- Market Dynamics and Fund Performance: The prolonged downturn in startup valuations and a challenging exit environment have prompted introspection within large VC firms. This environment has led to strategic shifts and, in some cases, departures of key personnel. citeturn0search11
- Emergence of New Investment Opportunities: The evolving technological landscape, particularly in areas like artificial intelligence, has created fresh avenues for investment. Partners are keen to capitalize on these opportunities through more agile and focused investment vehicles.
Notable Departures and New Ventures:
- Peak XV Partners: Formerly known as Sequoia Capital India & SEA, Peak XV has witnessed significant leadership changes. Managing Directors Shailesh Lakhani and Abheek Anand announced their departures, marking a pivotal moment for the firm post its split from Sequoia in mid-2023. citeturn0search1
- Intel Capital Spin-Off: Intel Corporation has decided to spin off its venture capital arm, Intel Capital, into a standalone entity. This move allows the new firm to raise external capital and operate with greater independence, reflecting a broader trend of corporates restructuring their investment strategies. citeturn0news35
Implications for the VC Ecosystem:
This wave of departures signifies a transformation within the venture capital industry:
- Increased Competition: The rise of new funds intensifies competition for both deals and limited partner (LP) commitments.
- Diversification of Investment Approaches: Emerging funds often bring innovative investment theses, focusing on underserved sectors or adopting novel funding structures.
- Challenges for Established Firms: Traditional VC firms may need to adapt to retain top talent and stay competitive in a rapidly changing environment.
As the venture capital landscape continues to evolve, both investors and entrepreneurs must navigate this dynamic environment, balancing the opportunities presented by new entrants with the enduring strengths of established players.
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I think a new guard is forming.”
Absolutely. The departure of seasoned partners from blue-chip VC firms signals a generational shift, with a new guard emerging—one that prioritizes autonomy, specialization, and agility over the traditional venture model.
These rising investors are often focused on niche sectors like AI, deep tech, and climate, aiming to move faster and be more founder-friendly. Plus, with the challenges facing legacy firms (longer exit timelines, constrained LP capital, and internal power struggles), there’s room for smaller, more focused funds to thrive.
Who do you see as key players in this new guard?
the intersection of AI and the physical world. “I believe some senior GPs [general partners] are realizing that their passion, and expertise, lies in early stage true venture, which is a bit different than what many multi-stage firms do,“ Zuberi told Forb
And more are coming. At Forerunner Ventures, partner Brian O’Malley recently transitioned to board partner, per the firm’s website; Lately, he has been taking meetings about potentially raising his own fund, two sources said. At Index Ventures,
“The golden handcuffs are breaking. Financial loyalty at VC firms has never been weaker.”
Absolutely. The departure of seasoned partners from blue-chip VC firms signals a generational shift, with a new guard emerging—one that prioritizes autonomy, specialization, and agility over the traditional venture model.
These rising investors are often focused on niche sectors like AI, deep tech, and climate, aiming to move faster and be more founder-friendly. Plus, with the challenges facing legacy firms (longer exit timelines, constrained LP capital, and internal power struggles), there’s room for smaller, more focused funds to thrive.
Who do you see as key players in this new guard?
You don’t really want to leave a fund when it’s sitting up 3x, 4x or 5x,” said Ed Zimmerman, a partner at law firm Lowenstein Sandler who regularly works with investors to negotiate their exit deals. But some outsized funds might be lucky to double their money or even make it back. “We have definitely heard over the last year or two that clients didn’t have as much confidence in their carry in their last fund,” Zimmerman added.
“People are realizing that some of these funds may not even return their capital at all,” said Category Ventures founder Villi Iltchev, who left Two Sigma’s venture arm to launch a $160 million first fund in December. “At a big firm, there can be very little to tie your work and your reward.”
Or as one leader of a large endowment put it: “The golden handcuffs are breaking. Financial loyalty at VC firms has never been weaker.”