There’s an uncomfortable truth emerging in Silicon Valley that few want to acknowledge: we’ve reached peak venture capital. Roelof Botha’s recent comments about there being too much capital chasing too few profitable companies isn’t just a passing observation—it’s a fundamental diagnosis of what’s wrong with modern tech investing. For years, we’ve operated under the assumption that more money equals more innovation, but the evidence suggests the opposite might be true. When startups have endless runway, they lose the creative constraints that force breakthrough thinking. The discipline that comes from scarcity gets replaced by the hubris of abundance, and we end up with bloated companies solving trivial problems.
The structural shifts happening at firms like Sequoia Capital speak volumes about this new reality. Their move to an open-ended fund structure represents more than just a financial innovation—it’s a philosophical rejection of the 10-year fund cycle that has defined venture capital for decades. This traditional model created perverse incentives where VCs felt pressure to deploy capital quickly and exit investments prematurely, often forcing companies to go public before they were truly ready. The average private company now stays private for 13 years before IPOing, which means the old model was fundamentally misaligned with how long it actually takes to build enduring businesses. Sequoia’s permanent capital structure acknowledges that great companies aren’t built on quarterly timelines but through decades of patient cultivation.
What’s particularly fascinating about this moment is how Wall Street’s embrace of venture capital through vehicles like Industry Ventures’ $900 million emerging manager fund creates a paradox. On one hand, it validates venture as a legitimate asset class worthy of institutional attention. On the other, it pours more fuel on the very fire that Botha warns about—too much capital chasing too few quality opportunities. The 18% net IRR and 2.2X MOIC that Industry Ventures has delivered since inception are impressive numbers, but they also represent the kind of returns that attract more capital, potentially creating a self-defeating cycle where success breeds the conditions for future underperformance.
The psychological dimensions of this capital glut deserve more attention. Botha’s observations about loss aversion and anchoring biases reveal how emotional factors distort investment decisions in an environment of excess. When there’s too much money chasing deals, investors become less discerning, anchoring to inflated valuations and becoming loss-averse about missing out on the next big thing rather than focusing on fundamentals. This creates a market where FOMO drives decision-making more than rigorous analysis, and where the discipline that Sequoia has cultivated over fifty years becomes increasingly rare. The firm’s refusal to even use the word ‘deal’ speaks to their understanding that this isn’t about transactions but about partnerships built over time.
As we stand at this inflection point, the venture industry faces a critical choice: continue down the path of capital abundance that may be undermining the very innovation it seeks to foster, or embrace the discipline and patience that true company-building requires. The structural changes at Sequoia and the growing secondary market for private company shares suggest the industry is already moving toward a more mature, thoughtful approach. But the real test will be whether other firms follow suit and whether limited partners have the patience to support these longer time horizons. In the end, the most innovative thing the venture industry might do isn’t funding the next AI unicorn, but redesigning itself to better serve the founders and companies that actually change the world.
About the Author
