The Looming Layoffs for Venture Capitalists

This week’s news that fintech investor Anthemis Group has cut 28% of its staff, which comes one month after Y Combinator slashed about 20% of its workers, suggests more venture capital layoffs are coming.

The shrinking appetite of their limited partners means many will likely raise smaller funds, taking away resources to maintain headcount that ballooned during the record bull run. Recall that VC firms’ management fees, usually 2% of a fund, pay for salaries. Smaller funds mean less money left in the piggy bank to pay staff. 

It doesn’t help that far too many firms exist. With less LP capital flowing into funds, it will be impossible for all of them to avoid layoffs. The most vulnerable should consider an unusual option: consolidation. Weaker firms, particularly newer funds, should join forces to survive.