The largest venture capital firms are expanding, raising more capital, and exploring new markets—but are not always finding viable opportunities (https://www.forbes.com/sites/dileeprao/2025/02/10/vcs-dont-start-unicorns-the-1-lesson-from-andreessen-horowitz/).
The real lesson from DeepSeek may be that while the U.S. pours billions into innovation through bloated VC funds, China seems to be imitating the technology, and improving the strategy by developing ‘low-cost products that are “good enough” to outcompete rivals.’ (Chinese AI Is Following a Familiar Playbook. U.S. Firms Should Worry.)
VCs Are Bloating: Fewer Firms, More Money
So, should Silicon Valley rethink its approach? The VC industry is becoming increasingly concentrated. In 2024, just nine VC firms raised $35 billion accounting for 53% of all U.S. VC funding, while, 30 firms raised 75% of the total capital (https://pitchbook.com/news/articles/us-vc-fundraising-concentration-andreessen-horowitz). This consolidation raises questions about efficiency, innovation, and the impact of VC bloat on entrepreneurs.
This trend has significant implications for entrepreneurs.
Implication #1: Fewer Startups Are Benefiting From VC
As VC becomes more concentrated, funding is flowing into fewer, larger deals.
With an 80% failure rate, only ~1,680 startups will likely succeed with VC – a very tiny fraction of startups. The rest won’t get VC or will fail with it.
Implication #2: Entrepreneurs Can Benefit More from Unicorn Skills Than VC
Since the majority of businesses will never receive VC, or benefit from it, entrepreneurs must focus on alternative growth strategies. Data shows that 94% of billion-dollar entrepreneurs built their companies without VC—or delayed it. Significantly, they relied on bootstrapped strategies and finance-smart growth tactics to scale on their own terms. They controlled their ventures and the wealth created.
Implication #3: Fewer IPOs Mean Growth Matters
IPO numbers have plummeted from 1,035 (2021) to just 225 (2024) (https://stockanalysis.com/ipos/statistics/). Since IPOs are the most lucrative exits for VCs, this decline has highlighted the importance of strategic sales to corporate buyers. However, corporate acquisitions are often less lucrative compared with IPOs, meaning lower returns for entrepreneurs and investors. By avoiding VC as 76% did, entrepreneurs can focus on growth without the pressure of an exit timeline. Entrepreneurs who delay VC funding and control their venture, as Zuckerberg did, can dictate when and how to exit.
Implication #4. Corporate Acquirers May Become Smarter.
Corporations reportedly fail on 70% – 90% of their M&A deals (see my previous blog on Forbes about “Why Corporate Innovation Fails: 5 Insights From Google’s Gambles”). One major reason? Overpaying for overhyped VC-backed ventures. If corporations become smarter and more selective buyers, it may become harder for founders to cash out at inflated valuations. This makes building a profitable, independent company a stronger play.
Implication #5: If Your VC Isn’t Top-Tier, You Need Control
The top 20 VCs reportedly capture about 95% of all VC profits (https://www.forbes.com/sites/dileeprao/2023/04/14/20-vcs-capture-95-of-vc-profits-implications-for-entrepreneurs–venture-ecosystems/),. This means entrepreneurs backed by remaining VC firms may face significant downsides:
- Weaker exit strategies with fewer lucrative options.
- Lower valuations reducing potential returns.
- Greater dilution, leaving founders with less ownership and control.
Rather than taking the high-risk early-VC approach and lose control of their ventures, as was done by Steve Jobs who lost control of Apple early on, entrepreneurs should follow the strategy used by Elon Musk who kept tight control of all his ventures.
MY TAKE: Chasing VC has become like gambling, with the odds stacked against most entrepreneurs. The reality is that 99.995% of U.S. businesses will not benefit from VC funding (see one of my previous blogs). The smarter alternative is to master the skills that drive unicorn success – the same strategies that 94% of billion-dollar founders used to grow their companies – without VC or by delaying VC until they can get VC (if they need it) and keep control (https://www.forbes.com/sites/dileeprao/2023/11/02/entrepreneurship-361-6-skills-from-billion-dollar-entrepreneurs-for-vc-free-takeoff/). Instead of risking their venture and their future in a game where the house wins, entrepreneurs should focus on building profitable, resilient businesses on their own terms.
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