In a surprising turn for the venture capital world, CRV, one of the oldest firms in the industry, plans to return $275 million to its investors. This decision comes as a response to changing market conditions that have left many in the startup space reeling.
Typically, venture capital firms raise substantial funds to invest in startups, aiming for big returns down the line. However, CRV’s partners recently realized that the landscape has shifted dramatically since the booming years of the pandemic. In 2020 and 2021, startups and investment firms raised enormous sums, confident that the good times would continue. Fast forward to today, and the excitement has faded, with many startups cutting jobs or closing up shop entirely.
The market for initial public offerings (IPOs) and acquisitions—the main ways venture firms make money—has also taken a nosedive. While there’s still a buzz around new artificial intelligence ideas, many established companies are struggling, leaving CRV to rethink its investment strategy.
The firm raised a $1 billion fund for younger startups last year, alongside a $500 million fund for more mature companies. But as the year progressed, CRV’s partners noticed they were passing on many investment opportunities for these older companies. The math just wasn’t adding up anymore. With so few startups likely to reach valuations of $10 billion or more, they decided it was better to return the uninvested money than settle for lower returns.
“Data doesn’t support that many big wins anymore,” said Saar Gur, a partner at CRV. Instead of chasing after low-hanging fruit, CRV has opted to streamline its approach. They’ll continue to invest from their main $1 billion fund, which is already two-thirds committed, but future funds may be smaller.
Founded in 1970, CRV has a rich history of investing in companies born from MIT research. It has evolved over the years, even changing its name from Charles River Ventures in 2014 and fully moving to the West Coast in 2021. Interestingly, this isn’t the first time CRV has cut back; in 2002, it slashed a $1.2 billion fund down to $450 million in response to a similar market shake-up.
CRV’s move to return funds highlights the current uncertainty in venture capital and the need for firms to adapt to new realities in a rapidly changing marketplace.
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