Senior partners in the venture capital world are increasingly exiting legacy firms in Silicon Valley and Asia. Industry insiders say the trend is accelerating and driven by structural shifts in how venture capital operates.

Notable recent departures include Matt Miller from Sequoia and Sriram Krishnan from Andreessen Horowitz. In Asia, Abheek Anand and Shailesh Lakhani left Peak XV Partners—formerly Sequoia Capital India & SEA—in February. While turnover among junior employees is typical, such exits by senior figures have been rare due to the prestige and financial rewards tied to those roles.

Rick Zullo, founder and managing partner of Equal Ventures, stated, “More departures are definitely happening. I think many, still not yet to be announced, but many, are very much in the works.”

Venture Capital Turns Into Asset Management

Zullo pointed to a major shift over the last decade: “I think we’ve seen a big sea change over the course of the last decade that has led to the venture [capital industry] turning into asset management more broadly, and I think that’s actually the crux of this issue.”

He added that VC firms are now scaling to become more like financial giants such as Blackstone or Goldman Sachs. This change, he said, has created cultural dissonance between those who want to stick to pure venture capital and those who embrace the asset management model.

Big Firms, Slower Decisions

Some investors argue that decision-making at large firms has become sluggish. These firms are said to prioritize growing the capital under management instead of backing promising startups. In 2024, nine U.S. VC firms raised $35 billion—half of the country’s total—according to PitchBook.

Alexandre Lazarow, managing partner of Fluent Ventures, observed, “Big firms have gotten much, much bigger. At the same time, there’s been an explosion of [small] venture capital firms ... so I think we’ve seen the rise of specialization and the rise of regionalization in tech.”

According to Lazarow, more investors now prefer to manage smaller funds where they can make high-conviction bets with greater autonomy. Tools like AngelList and Carta have also lowered the barriers to starting new VC funds. Limited partners have become more open to investing in solo managers.

Zullo explained, “There’s a bunch of incredible venture capitalists at some of these very large-scale firms that have had tremendous success who are now deciding that they don’t want to be asset managers ... they don’t want to deal with the bureaucracy or corporate structures. They just want to go back to the basics.”

One such figure is Bilal Zuberi, who left Lux Capital in December after 12 years as a general partner. He is now launching Red Glass Ventures, focused on early-stage startups.

Zuberi said that large funds often sideline senior partners from early-stage investing. “Founders would want to work with senior, experienced investors who could take board seats... and provide real advice ... and frankly, that’s just hard to do in a bigger firm.” He added that writing early conviction checks in a smaller setup offers high ownership and true alpha returns.

Not All Exits Are Voluntary

While some partners leave for better opportunities, others are being quietly pushed out. Zullo noted, “There are plenty of folks who are simply being pushed out of these firms very silently ... The consolation prize of not making general partner of those firms is for them to become an emerging manager and serve new firms.”

Industry insiders say recent VC returns have underwhelmed, partly due to macroeconomic conditions. During the pandemic, near-zero interest rates led to an investment surge. But as interest rates rose again in 2022, investor caution returned and startup valuations came under scrutiny.

Lazarow explained, “One of the challenges that’s happened over the last couple years for LPs (limited partners) ... is that the velocity of returns was much higher in 2021, through a lot of IPOs. People got their money back.” He added, “Then all of a sudden, musical chairs stopped. The IPO market closed, exits [went] down, M&A has decreased, and so I think that a lot of LPs [have] too much money on a relative basis in the category [and] not enough liquidity to come back.”

Impact on Portfolio Companies

When senior partners exit their firms, the startups they back may feel the effects. Many serve on boards and act as close advisors to founders. Zullo shared, “Three of our portfolio companies have had at least one board member turn in, i.e., that person has left their firm, and we’ve had multiple companies that have lost multiple [board members].”

Lazarow emphasized the importance of smooth transitions: “I think the best way of doing it is being very thoughtful about the transition with the portfolio, CEO, and founding team. It’s important the company doesn’t become an orphan within the VC fund and has continuity.”

The absence of a strong board advocate can complicate follow-on fundraising rounds and internal decisions. Replacements are often junior and may lack the same influence, which can disrupt operations.

According to Carro co-founder and CEO Aaron Tan, a company’s stage also matters. “It depends on the stage of the company. The more late-stage you are, the less likely you are going to need any guidance because you are the subject matter expert.” He added that most partners are not operators, so many founders don’t rely on them for operational guidance anyway.

PHOTO: SHUTTERSTOCK

This article was created with AI assistance.