Published , by Donovan Erskine
Published , by Donovan Erskine
Tech companies saw a massive boom during the height pandemic, as countless business, academic, and social institutions turned to video chat apps and messengers while in-person gatherings weren’t viable. With those days now firmly in the rearview mirror, many tech companies have seen their valuation fall as a result. This has had consequences for the groups that previously made heavy investments into them, as well as those hoping to raise funds in the future. Some experts are now saying that we could likely see a lot of zombie venture capital firms pop up in the future.
CNBC reported today that financial experts have warned of a grim future for a lot of venture capital firms. A zombie venture capital is one that is unable to raise funds to invest in new businesses, essentially locking itself into a weird limbo. One of the experts that spoke to CNBC was Maelle Gavet, CEO of the global entrepreneur network Techstars.
“We expect there’s going to be an increasing number of zombie VCs; VCs that are still existing because they need to manage the investment they did from their previous fund but are incapable of raising their next fund. That number could be as high as up to 50% of VCs in the next few years, that are just not going to be able to raise their next fund”
The problems facing venture capital firms go back to the continued struggle of tech start-ups, which have struggled to see significant growth over the past year or so. Looking at the Nasdaq Composite, valuation across the board is down 26 percent from its peak in November 2021. We’ll be keeping a close eye on venture capitals as well as the rest of the finance world this year, so stick with Shacknews to see how the situation develops.