Some VCs reflect on the industry slowdown; QED Investors co-founder Frank Rotman estimates that up to 80% of VC firms are in strategically challenged positions
by a wide margin” @albertwenger https://www.vice.com/... Maxwell / @maxwellstrachan : I spoke with VCs about an uncomfortable truth: There are now way too many of them. “If you look at the industry as a whole, it's too big,” one said. https://www.vice.com/...
Context & Ripple Effects
Rotman's 80% figure lands after two years of visible retrenchment across the same industry: Founders Fund quietly halved its undeployed Fund VIII in early 2023, and by December OpenView had laid off most of its staff and stopped making new investments entirely. The VICE piece adds the candid admission insiders had been circling — that the industry itself is 'too big' for the returns it can generate.
It is also a personal inflection point: Rotman says he will move to partner emeritus at QED Investors by the end of 2025 to launch his own startups, an exit from the GP seat that mirrors the broader shakeout rather than contradicting it.
First-order effects
- Firms in Rotman's 'strategically challenged' majority face an identity crisis right now — OpenView's halt on new investments shows what losing a deployable strategy looks like, and the wave of partners quitting or being pushed out of big firms in 2024 shows who absorbs the cost.
- QED loses a co-founder from active partnership by end of 2025, with Rotman redeploying himself as a startup founder instead of a backer of them.
Second-order effects
- LPs have a clearer basis to concentrate commitments in the minority of firms with a defensible strategy, squeezing management-fee economics for the challenged middle — the same dynamic that let solo investors and small firms look responsive during the SVB crisis while many big firms disappointed founders.
- GPs exiting to found companies thin the mentorship and follow-on capital available to portfolio startups, shifting relative advantage toward firms still actively deploying.
Third-order effects
- If the pattern holds, venture structurally consolidates into fewer large platforms plus boutique specialists, with the oversize cohort absorbed via quiet fund shrinks, staff cuts, and partner attrition rather than headline failures.
- A generation of operators-turned-investors cycling back into founding blurs the investor/founder boundary and may seed the next fund class once the current contraction clears — echoing how prior downturn surveys, like the 2016 valuation-expectations poll, marked cycle bottoms rather than endings.
The trend: Venture capital is entering a consolidation phase in which an oversize firm population shrinks through fund cuts, layoffs, and partner exits until strategy, not headcount, determines who keeps raising.