Venture Capital Partners Are Leaving Big Firms in Droves

(Bloomberg) — Being a venture capital partner is supposed to be a job for life. But in 2024, dozens of investors at some of the most storied firms have quit or been pushed out, the effect of a protracted startup downturn and a broader shift in the role of VC firms.

In the last month alone, Matt Miller said he was leaving Sequoia Capital after more than a decade; Lux Capital general partner Bilal Zuberi started work on a new fund; and general partner Sriram Krishnan left Andreessen Horowitz. Krishnan is planning to work with the White House advising on AI policy, he said on Sunday. 

An unusual number of investors are working on new firms, like Ethan Kurzweil, formerly of Bessemer Venture Partners, and Mike Volpi, who had been a key figure at Index Ventures. This year also saw some veteran VCs step back from the day-to-day grind (Brian Singerman at Founders Fund), and others switch firms (Keith Rabois at Khosla Ventures). 

Over the last few weeks, “not a day goes by that we don’t see some departures from one of these multibillion-dollar funds,” said venture capitalist Rick Zullo, co-founder of seed-stage fund Equal Ventures.

The turnover in venture, elevated since last year, has accelerated in recent months, industry watchers say. The “uptick in general partner departures has been building for a while,” said Elizabeth “Beezer” Clarkson, a limited partner on the board of the National Venture Capital Association. Some investors wanted to stick out the worst of the downturn before retiring, she said. Others have grown frustrated by the constraints of working at multibillion-dollar funds, which have become more common in the once-scrappy world of VC. And for many, bleak market conditions have led to less funding, and leaner operations. 

“Unless the firm is able to raise a fund of equal value,” it makes sense for it to employ fewer investors, said Scott Sandell, executive chairman of Menlo Park-based venture firm NEA. “It’s undoubtedly much harder to raise than it was in 2021.”

While job switching is common among junior dealmakers in venture, senior investors tend to hold onto their coveted positions for decades, enjoying the generous pay and potential for mammoth returns on investments. The downturn has required VC firms to make unusually hard decisions, and in some cases part ways with partners whose investments have underperformed. 

The exits generally fall into two camps, Zullo said. First, there are “the folks who are true home-run hitters, massive out-performers, and they are just tired of dealing with the evolution of venture capital into asset management.” In the second camp are the people who started investing during the pandemic’s zero-interest rate environment, who “didn’t get a lot of hands-on training,” he said. “A lot of those folks are getting bounced out right now.”

In the tight-knit world of VC, the true reason for an investor’s exit may never become public. In a few cases, personality clashes drove departures, the result of tensions exacerbated by market pressure, some investors said. A fraught political environment in an election year, coupled with a more challenging economic climate, also led to some internal discord.

“When money is flowing less easily or less readily, naturally, there is a stress test that is put on a partnership,” said venture capitalist Eric Bahn, co-founder of the early-stage firm Hustle Fund. 

Departures at the top could be good news for up-and-coming investors, and new firms could help change the way the industry operates — if they can raise money. “The structure and architecture of the industry has shifted in a way that creates that space for new managers,” said Ken Chenault Jr., a former partner at General Catalyst who launched a $62 million early-stage fund, Benchstrength, this month. 

Chenault Jr. said the rise of megafunds has pushed many investors to create smaller, more nimble firms focused on spending more time with nascent companies. As many top venture firms scaled their fund sizes from several hundred million to several billion, priorities and internal processes have shifted, “the same way a startup operates differently from a public company,” Zullo said.

Volpi, one of the industry’s biggest names, stepped back from his investing role at Index last year. Now, he’s recruited Bryan Offutt and Ishani Thakur, also formerly at Index, to work with him on an early-stage fund called Hanabi Capital, according to people familiar with the matter. Hanabi invests Volpi’s personal money as well as funds from his friends and family, according to the people, who asked not to be identified discussing private information. 

Index, Volpi and Thakur declined to comment. Offutt didn’t respond to requests for comment.

Earlier this year, Kurzweil joined Kristina Shen, a former general partner at Andreessen Horowitz, and Mark Goldberg, formerly of Index Ventures, to launch Chemistry, a $350 million early-stage fund. In a blog post, the three investors wrote that they planned to “out-hustle the legacy firms that have grown distracted by scale.”

Other investors starting new funds include Miller, formerly of Sequoia, whose new firm will focus on European founders. And Zuberi, who plans to raise a fund dedicated to artificial intelligence investments, Bloomberg reported. Meanwhile, Michael Gilroy left Coatue Management and joined forces with seasoned tech executive Gokul Rajaram. They started the investment firm Marathon and plan to raise $400 million to $500 million.

The list of upstart firms fundraising is long and competitive, and there are likely to be even more that begin trying to raise capital in 2025. For investors launching a first-time fund, even with the support of their former bosses, the process could be difficult.

“They are going to come to a harsh reality,” Bahn said. “I am not sure they will find much appetite from big institutions to back them. They will find this is a really difficult market for any emerging manager, period.”

Limited partners, the institutions and wealthy individuals that invest in venture funds, prefer to give their money to renowned firms that have proven their ability to return capital. In 2024, just nine VC firms raised 50% of the total capital allocated to venture funds this year, according to data provider PitchBook. Meanwhile, all of the emerging funds combined raised only 14%.

“We are living in a tricky environment,” said John Monagle, a co-founder of Benchstrength. “If funds aren’t growing, or they are not scaling, or if partnerships decide that the next fund will be smaller, it is a little more difficult.” He added, “It creates a scenario where layoffs can happen.”

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