Is VC Dead? Evolved? Or Just Desperately Clinging to Life?

At the intersection of greed and survival

The “VC is dead” take has been making the rounds lately, triggered by Lightspeed Venture Partners — one of Silicon Valley’s mega VCs — registering as an RIA. I’ll be honest: I’ve been beating this drum for two years now. My thesis was simple — VCs got too big, returns would compress, and natural selection would kick in. You saw it. I called it.

And here we are. The mega VCs are cornered, scrambling for new survival strategies. Some are diving into politics. Others are expanding into entirely different asset classes. The desperation is palpable, and frankly, kind of fascinating to watch from the front row.

I already wrote about this back in June 2023 (”The End of the Mega VC Era”) and again in November 2024 when I connected the dots between Silicon Valley’s political awakening and their financial desperation. So I feel like I’ve already spoiled the ending here, but let me unpack it anyway.

Wait — What’s an RIA?

Quick primer for those who need it. VCs traditionally operate under exemptions that free them from heavy disclosure requirements, but the trade-off is they must invest 80%+ of their fund in private companies. No more than 20% can go into public equities, bonds, real estate, or other asset classes.

Register as an RIA, and those handcuffs come off. Yes, you pick up a bunch of compliance obligations, but you gain the freedom to invest across any asset class you want.

Lightspeed isn’t exactly a pioneer here. The RIA club already includes some familiar names: a16z (expanded into crypto), General Catalyst (bought an entire hospital chain), Sequoia (introduced an evergreen fund model with no fixed fund life), Founders Fund (crypto, secondaries, and public equities), and now LSVP (hired a buyout team).

Innovation? Don’t Make Me Laugh.

On the surface, this looks progressive — VCs evolving, seizing opportunities in secondaries and PE. But the timing tells you everything. This isn’t innovation. This is an escape plan.

The numbers are brutal. Exits have completely dried up. If you didn’t get your money back in 2021, you’ve been staring at a barren capital markets desert ever since. And the psychological damage is real — these same investors watched valuations double every six months during the bubble, and now they’re sitting on portfolios that feel like they’ve been through a shredder.

LPs aren’t doing any better. Since 2020, distributions have been woefully short of capital calls. Many LPs got caught up in the 2021/2022 mania, making oversized direct investments that were beyond their capacity. They’re hurting internally, even if they won’t say it publicly.

The result? More VCs are giving up on raising new funds or shutting down entirely. The trend line is unmistakable.

And that conspicuous political engagement from an industry that used to pride itself on staying above the fray? That’s not civic duty — it’s self-interest. These firms are sitting on massive positions in crypto and late-stage companies that need favorable M&A and regulatory environments to generate any exits at all. They need the political agenda to move in their direction. Simple as that.

The AUM Game Is the Real Tell

Here’s where it gets interesting. Fund performance, especially 2020/2021 vintages, is looking rough. My personal benchmark: a strong VC fund should hit 1x DPI (full principal return) by year seven of a ten-year fund life. The 2020-2021 vintages are already 4-5 years in, with only 2-3 years left on the clock. The math is not mathing.

So what happens when you can’t fundraise at the pace you’ve grown accustomed to? When your management fee machine starts sputtering? You pivot. You expand into asset classes where you can still grow AUM.

Look at Tiger Global — the firm that was supposedly rewriting the VC playbook in 2021-2022. Their Fund 15 (PIP15) was $12.7B. Fund 16? $2.2B. That’s not a haircut — that’s a scalping.

The trendy expansion targets are secondaries and private equity, and the pitch writes itself. For secondaries: “We can buy great assets at half price!” (Let’s just quietly ignore that we were the ones who overpaid in the first place.) For PE: “We’ll use AI to revolutionize buyouts and roll-ups!” (Using the AI startups we overpaid for, naturally.)

There’s also a convenient bonus — these strategies let firms cross-trade assets between their own funds, manufacturing DPI to show LPs. And because PE and secondaries typically involve larger fund sizes with lower return expectations, the management fee economics are actually better than VC. For firms with LP relationships and dry powder to deploy, it’s a no-brainer. At least on paper.

But Can They Actually Pull It Off?

I have a friend at Greenoaks, and look — they make money. Good for them. But I’ve never quite respected their approach as VC. Their background is distressed investing at a hedge fund, and the moves that get them attention are public equity bets, not early-stage venture picks. As a hedge fund manager? Sure, impressive. As a VC? The label doesn’t fit the performance driver.

I apply the same lens to the mega VCs charging into PE territory. They’re packaging this as industry innovation, but PE firms have been doing this for decades with proven playbooks and battle-tested teams. I keep hearing the same snarky observation from PE circles: “VCs seem to think they invented buyouts.”

And the whole “we’ll bring AI to PE” angle — the idea is fine in theory, but you haven’t even demonstrated AI-driven transformation in your own backyard. VC firms haven’t revolutionized their own industry with AI yet, and now they’re going to disrupt PE, where the operators are legitimately world-class? It reeks of the classic VC hubris: “We are technology’s chosen people.” Show me the AI revolution in venture first, then I’ll take the PE pitch seriously.

The bottom line: excessive AUM chasing, FOMO-driven investment mistakes, and brutal competition have pushed these firms beyond their core competency. Having done both VC and PE work, I can tell you — the skillsets and mindsets are fundamentally different. PE isn’t rocket science, so not everyone will crash and burn. But the transition won’t be the promised land these VCs are selling to their LPs. And from an LP perspective, the question practically asks itself: if you’re doing PE, why wouldn’t I just allocate to an actual PE firm with a 20-year track record?

My verdict: as VCs, these mega funds are dead. They’ve been reborn as diversified asset managers. And this transformation sits right at the intersection of greed — the relentless drive to maintain growth — and survival — the desperate need to stay relevant.

A Familiar Pattern: Korean VCs Heading Stateside

Side note — and this is something I find personally interesting — there’s been a noticeable surge of Korean VCs expanding into the US market. The parallel to the mega VC playbook is hard to miss. Just as the big US firms are fleeing into PE because their home turf is brutal, Korean VCs are crossing the Pacific because the domestic market is suffocating.

I genuinely root for them. More Korean-speaking investors in the US ecosystem means a stronger network for all of us. But the challenge is real — expanding beyond your home court under duress is one of the hardest things in this business.

Here’s the silver lining though: if you’re a Korean-speaking founder building in the US right now, you’re in a fantastic position. Every Korean VC expanding stateside has their attention fixed squarely on you. But with that attention comes capital concentration and bubble risk, so factor that into your planning.

If any Korean VC folks want to collaborate or could use a hand with your US expansion, reply to this newsletter or hit me at ian@ianpark.vc. Let’s dream big together. I wrote about this topic two years ago (”Why Is It So Hard for Korean VCs to Crack Silicon Valley?”), and honestly, most of it still holds up.

So What?

The broad skepticism is warranted. Both in Korea and the US, VC as an asset class is in a tough spot. Bubble-era FOMO will drag on returns for years. Alternative strategies like public equities and private credit are outperforming. In a high-rate, low-liquidity environment, the least liquid asset class is naturally the hardest sell — both for fundraising and for managing a portfolio of struggling companies that demand constant attention with diminishing returns. VC entering a dark age? I think that’s a fair read. It’ll come back eventually, but “eventually” might be a while.

But dark ages create openings. If the mega VCs are becoming asset managers, chasing bigger deals with bigger funds, that leaves a vacuum at the early stage. Smaller, hungrier, newer funds now have room to operate — room that didn’t exist when the giants were stomping through every stage of the funnel.

The next generation of VCs? My bet is on AI-native funds — firms built from the ground up around AI-powered software and network-driven distribution. If the first generation was star-player VCs and the second was platform VCs like a16z, the third generation will be AI-native platforms. I’ve been thinking about this obsessively, and I’ll go deep on it in a dedicated piece soon.

The cycle always turns. The question is who’ll be standing when it does.