Key Debates Shaping US Venture Capital in 2023
Emerging trends and heated discussions among VCs and founders
1Down rounds dominate discussions
With valuations dropping across stages, VCs debate whether to push for down rounds or extend runways. Late-stage companies face toughest revaluations, with some Series C+ rounds seeing 30-50% cuts. Early-stage deals maintain relatively stronger pricing but face longer due diligence.
2Founder-friendly terms return
Investors report increased pressure to remove aggressive terms like multiple liquidation preferences. The power balance shifts toward founders as capital becomes scarcer. Some firms proactively simplify term sheets to win deals in competitive seed rounds.
3AI investment frenzy continues
Generative AI startups capture disproportionate attention, with some seed rounds closing in weeks. Traditional VCs compete with corporate investors and angel syndicates. Skeptics warn of bubble dynamics similar to 2021's crypto rush.
4LP allocations under scrutiny
Limited partners reassess VC allocations after poor 2022 returns. Many pension funds hit their private market caps, forcing VCs to seek sovereign wealth funds. Emerging managers face toughest fundraising environment in decade.
5Secondary market activity surges
Stakeholders explore secondary sales as liquidity options narrow. Specialized funds buy employee shares at steep discounts. Some VCs facilitate tender offers to provide partial exits amid frozen IPO markets.
6Geographic diversification debates
While Bay Area remains dominant, Miami and Austin lose some momentum. Investors debate true opportunities in secondary markets versus coastal hubs. Remote work enables more distributed startup creation but concentrates funding.
7Corporate VC retreat begins
Many corporate investment arms slow deployment or shutter entirely. Exceptions remain in AI and climate tech where strategic interests align. Startups relying on CVC money face sudden funding gaps.
8Long-term implications emerging
The current reset may permanently alter risk appetite and fund structures. Smaller, specialized funds could gain prominence over mega-funds. Vintage 2023 may produce outsized returns by avoiding prior excesses.
Original article: Sifted — Key Debates Shaping US Venture Capital in 2023