Structural shifts in the venture capital market have squeezed early stage venture capital (“VC”) funds over the last five years: the number of early stage funds raised and their capital share have been cut in half (see the chart below). But, early stage VCs have hidden assets, and they are deploying strategies to capture more of the value they create, e.g., by creating Opportunity Funds to fully utilize pro-rata rights. And as the early stage segment contracts and the later stage expands, there will be more money chasing the best emerging companies, shifting the terms of trade in favor of the first investors. (Disclosure: New Atlantic Ventures, in which I am a partner, is an early-stage VC fund).
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