The venture capital industry can expect a lot of down rounds and restructuring in 2023 and 2024. AI will continue to receive new investment while small funds with no DPI will be hit particularly hard, according to venture capitalists.
The venture capital industry is likely to see a shift towards larger funds and more established players, as smaller funds with no previous exits struggle to raise capital in the current market. First-time and second-time funds are likely to face challenges, with investors preferring to invest in established firms that are selective with their deals.
Sequoia refused to participate in a pay to play around for Company Citizen which led to a 10 to one share decrease for those who did not invest, a move typically not done by VC firms when they leave a company's board.
In the second half of 2023 and all of 2024, there will be significant downward rounds and restructurings for many overfunded tech companies. While AI will continue to receive new investment, there will be a day of reckoning for many high-valued companies.
The well-being of employees must be prioritized, especially those who have been working for years but are now underwater by resetting the valuation, refreshing the equity pool, and issuing options, regardless of the opinions of the board.