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That Sound You’re Hearing Is 13% of Venture Capital Firms Quiet Quitting

🌈 Abstract

The article discusses the challenges and risks associated with venture capital investment firms, and how their decline can ultimately benefit startups and entrepreneurs in the long run.

🙋 Q&A

[01] The First $10,000 Investment

1. What was the author's experience with their first $10,000 investment in a startup?

  • The author lost most of the $10,000 they invested in their first startup.
  • The author did not have a second time investing $10,000 in a startup.

2. Why did the author's first investment experience matter?

  • The author realized that startup investment based on reason #1 (luck) was rare, and startup investment based on reason #2 (lack of experience) was a recipe for failure.
  • This led the author to avoid the "investor tourist" phase and stay away from such investors when pursuing future startup success.

[02] The Decline of Venture Capital Firms

1. What does the article say about the recent decline in venture capital firms?

  • According to a Pitchbook report, 13% of venture capital general partners (GPs) do not plan to raise another fund, which is double the rate from the first half of 2023.
  • This indicates that a significant number of venture capital firms are quietly quitting the industry.

2. What are the reasons behind this decline in venture capital firms?

  • Many of the GPs who are quitting were emerging managers who jumped into venture capital in 2019 or 2020 when the LP (limited partner) market could support more funds than today's environment.
  • The article suggests that these "investor tourists" got caught up in the excitement of startup success, became overconfident, and then realized the challenges of the startup lifestyle, leading them to quit.

3. How does the article view this decline in venture capital firms?

  • The author sees this decline as ultimately good for startups and entrepreneurs in the long run, as it ends a cycle of cheap money propping up a system that hasn't placed innovation at the forefront.
  • When innovation is forced to survive on its own merit, it can lead to maximum innovation, and when money becomes cheap again, it can be directed to the places where it's most needed.
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