Venture Capital Is Not Dead, Just Stretching At The Top

“Venture Capital is dead. Long live private equity.”

That provocative headline flooded social media recently, triggered by a Bloomberg piece announcing that Lightspeed Ventures had registered as a Registered Investment Advisor (RIA). Overnight, the narrative went viral. LinkedIn exploded with recycled takes and surface-level analysis, most chasing clicks rather than clarity. Yet amid the noise, few stopped to unpack the underlying trends.

So, what’s actually happening?

First, let's clarify something essential: Venture Capital isn't going away. It’s shifting, particularly at the "top." Out of thousands of U.S. VC firms, only a small number of major players have started adapting their model, stretching traditional boundaries toward private equity-style investment approaches.

Lightspeed, Andreessen Horowitz (a16z), Sequoia, and General Catalyst exemplify this shift. These firms have raised billions over recent years and, faced with managing unprecedented amounts of capital, have diversified their toolkit. Regulatory flexibility, permanent investment vehicles, public equity stakes, and even acquisition strategies are now part of their expanded playbook.

Yet, there are more than just size constraints reshaping Venture Capital today. The slowdown in IPOs and M&A activity has created a liquidity bottleneck, and the rise of AI is altering capital requirements, prompting funds to reconsider how they deploy capital. These pressures are especially relevant for anyone launching a fund in 2025, and probably in the next 2-3 years.

This article unpacks the main factors at play in Venture Capital today, helping VC managers make sense of how to position their next fund and how to "play the game on the field."

In This Article

Large Venture Capital Firms Have Become "Multi-Stage Capital Machines”

Over the past few years, top-tier VC firms have dramatically broadened their scope beyond traditional early-stage investing. Instead of solely making seed or Series A investments and then capping involvement, these firms are transforming into “multi-stage capital deployment machines” spanning seed through pre-IPO rounds.

Let's take a few (notable) examples.

Andreessen Horowitz (a16z) has grown from a $300 million fund in 2009 to raising $7.2 billion across five separate funds in 2024, of which three are over $1 billion (Apps, Infra, and Growth). The firm deliberately expanded its partnership and fund sizes as the tech market grew, moving from a model of one general fund to multiple large funds covering different sectors and stages.

Similarly, Sequoia Capital undertook a headline-grabbing structural overhaul in 2021, shifting to a single permanent fund (the Sequoia Capital Fund) rather than discrete early-stage funds. Sequoia is neither the first VC firm to opt for a registered investment adviser status, nor the first to employ an evergreen model. However, the move was notable for such a blue-blooded, venerable firm.

As chips shrank and software flew to the cloud, venture capital kept operating on the business equivalent of floppy disks.

Roelof Botha - Sequoia CApital (source: website)

Lightspeed Venture Partners and General Catalyst have also dramatically increased assets under management and added late-stage “select” or opportunity funds in recent years, positioning themselves to lead or participate in billion-dollar rounds. In 2025, Lightspeed raised about $7 billion for new funds and formally changed its regulatory status to enable these broader activities, a shift that took social media by storm.

Despite these changes, the mega-funds have not abandoned early-stage investing. Instead, they supplement it with later-stage and alternative investments. For example, a16z still operates a dedicated Seed Fund and remains active in Series A rounds, while Sequoia continues to back young startups, including through programs like its Arc accelerator.

However, with such large pools of capital, these firms must deploy much bigger sums than before. This inherently pulls them “upmarket” on the funding spectrum, forcing them to focus on late-stage rounds, or to write bigger checks across all stages, inflating valuations even in early rounds.

This dynamic is not new. Softbank's $90 billion Vision Fund and Tiger Global's large capital pool drove the VC industry to the excesses of the last bubble, which ended in early 2022. Mega-funds put pressure on GPs to inject vast sums of money into a limited number of growth-at-all-costs opportunities.

If a firm raises $5 billion or more, it needs multiple billion-dollar outcomes just to return the fund. The math behind a $50 million seed fund is significantly different from that of a $3 billion multistage platform (see below). Betting on power-law dynamics in early-stage startups is not enough. The top dogs in VC had to change the way they operated.

Related: LPs Beware: The “Super Power Law” in Venture Capital

The RIA Status Offers Venture Capital Firms More Flexibility

Adopting the Registered Investment Adviser (RIA) status allows leading venture firms to invest across more asset classes and offer different investment profiles to LPs.

RIAs Are The Exception in Venture Capital, Not The Rule

Traditionally, VC firms have avoided SEC registration by qualifying for exemptions that required at least 80% of their assets to be invested in privately owned startups, among other constraints.

Starting in 2019, some top firms chose to forgo that exemption and register as investment advisers, accepting heavier compliance burdens in exchange for greater flexibility in what and how they can invest.

Andreessen Horowitz was a first mover, announcing in April 2019 that it would no longer be a Venture Capital firm in the regulatory sense and had filed to become an RIA.

We have this massive ambition to be the best investor, period—and want the flexibility to invest in what we think is the best investment.

Margit Wennmachers - Andreessen Horowitz (source: PYMNTS.COM)

This move was motivated in part by a16z’s desire to invest in cryptocurrency tokens, liquid assets that fall outside the 80% rule, but the shift also signaled a broader ambition to be active across diverse asset classes.

While other major VC firms, such as Sequoia, General Catalyst, and Lightspeed followed suit, they remain exceptions. In 2024, fewer than two dozen VC firms were registered as RIAs, compared to 4,000 that remained Exempt Reporting Advisors (ERAs).

The RIA model has been adopted almost exclusively by the largest, best-resourced players who have the scale to justify the compliance costs and a strategic need for the flexibility it affords.

Riding Winners Longer

One significant advantage the RIA status provides is that Venture Capital firms can maintain their position in a startup well beyond its IPO without worrying about breaching the 20% limit for non-privately held stocks.

Gaining more flexibility also allowed Venture Capital firms like Sequoia to avoid the “artificial” 10-year fund cycle forcing them to prematurely step off the Board and distribute stock.

Without this possibility, a VC firm would have to liquidate a position that soars in value post-IPO due to regulatory constraints. Since most of the remuneration in Venture Capital comes from carry, the profit-sharing scheme between GPs and their LPs, selling too early may rob VCs of a sizable chunk of money.

We realized that great businesses continue to compound, the majority of the value accrues after the IPO.

Roelof Botha - Sequoia (source: Invest Like The Best)

Roelof Botha, Sequoia's steward since 2022, illustrated his point with the story of Square, the payment company co-founded by Twitter's Jack Dorsey. In January 2011, Sequoia invested in Square at around $0.95 per share, and by the 2015 IPO, shares reached about $9—a strong 9x return.

Yet, Sequoia chose to hold the shares for several more years, distributing them gradually at prices between $80 and $90. By delaying distribution, Sequoia dramatically boosted returns, increasing from a 9x to around a 90x multiple.

By structuring itself as an RIA with evergreen capital, Sequoia can maintain positions in public companies for much longer, capturing substantial additional upside that has historically been left on the table.

Related: VC Funds DPI: How Long Until Venture Capital Delivers Outlier Returns?

Diversifying Assets: "Blackstone in a Hoodie?"

Becoming an RIA also allows Venture Capital firms to invest in any asset class they deem strategically important, such as cryptocurrency tokens, public equities, or even acquiring entire companies or assets.

a16z utilized its RIA freedom to build a substantial crypto portfolio, launching a $300 million crypto fund in 2018, and subsequently larger crypto funds. The firm even participated in Elon Musk’s leveraged buyout of Twitter in 2022 (alongside Sequoia), a deal involving public stock and debt that a traditional Venture Capital fund would have had difficulty justifying.

Lightspeed’s new RIA status explicitly enables it to buy public stocks, do PE-style buyouts, build roll-ups, and scale secondaries. One commentator analogized Lightspeed’s transformation as being “a bit like Blackstone in a hoodie,” referring to the world’s largest alternative asset manager, overseeing over $1 trillion in assets across diverse sectors including private equity, real estate, infrastructure, and credit.

The RIA status also facilitates secondary sales, a crucial capability in these liquidity-stricken times, or run crossover funds investing in public markets, all of which were difficult under the old model.

This captures the stark shift: VC firms can now act in many ways like private equity firms or hedge funds, just applied to tech ecosystems. They are no longer confined to writing minority checks in private startup rounds.

However, unlocking these degrees of freedom comes with significant compliance overhead, including SEC audits and limits on fee arrangements, which is one reason most smaller Venture Capital firms avoid registration.

Why are Venture Capital’s incumbents making these dramatic moves? The drivers appear to be linked to constraints dictated by size, trends, and macroeconomic dynamics.

Venture Capital Maths Are Different for Multi-Billion Dollar Firms

The math behind venture investing is simple enough in smaller funds, but hitting top quartile returns becomes challenging as fund size grows.

For a fund size of $50 million to $500 million, the classic early-stage power law approach still holds: a single multi-billion-dollar exit can pay back the fund in full. These funds typically target owning around 5 to 15 percent of each company they back. If they catch a unicorn, that stake alone can cover the entire fund. Add in a handful of smaller wins—companies that return two to five times the money—and you’ve got a fund that clears the upper-quartile bar of 2× to 3× returns. Even with half the portfolio likely to fail, the basic power law math still works.