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Most likely, VCs are thinking about how much their investors will give them. If they could splash out in a recession, they would, but they can't. If they don't

• mrl67 15y ago
  Yes, fund cycle considerations are realistic concern as a public market downcycle does shift asset allocation considerations of LPs (a shrinking public pie leaves them over allocated in VC), but that still doesn't explain the behavior. A.) Funds already earmark follow-on round funds for their investments - so that doesn't change. To the degree that funds DON'T do this entrepreneurs should be VERY wary (essentially VCs are exposing your business to their business risks).... Think about how volatile the stock market can be when it corrects - if a VC is stopping investment based on a market correction that makes them concerned about raising the next iteration of their fund - then what they are essentially saying is that right up to the crash they were more than willing (to use a aviation term) invest past V1 (the point where there is no abort of takeoff)... which is just reckless. B.) This would only affect a portion of the VC universe at a time given the length of an specific fund's lifecycle, overlaps between funds within a specific firm, etc. And certain funds (e.g,. top decile performers) shouldn't be impacted at all. 3. Sorta validates my point about over reliance on the "splash" or home run, and or pushing risk off to later stage investors to generate return.