The reinvention of VC in 2025
The traditional venture capital model is undergoing significant change. The classic VC playbook is being rewritten by mega-funds, regulatory shifts, and newly created AI dynamics. A leading example is Lightspeed's transition to a Registered Investment Advisor structure. This shift reflects a broader trend driven by a growing need for liquidity and a more opportunistic approach to investing across multiple asset classes.
A quick VC evolution storyline
- 1. Cheap money lit the fuse (2020 to H1 2021).
Zero-rate policy plus pandemic stimulus unleashed record VC fundraising and exits; funds closed in weeks and "grow at all costs" ruled. - 2. The party paused, valuations lagged (H2 2021 to 2022).
Inflation plus Fed hikes cut liquidity; deal count plunged while pricing stayed sticky, freezing the market. - 3. Survival mode and down-round reality (2022 to early 2023).
Bridge SAFEs, flat extensions and layoffs spread as exit value collapsed 90% and deal value fell. - 4. Generative AI reset sentiment (mid 2023).
ChatGPT's breakout reignited capital; generative AI startups soaked up outsized rounds despite the broader slump. - 5. Capital concentrates, not expands (2024).
Mega-rounds of $100m and above swallowed a significant share of total funding, hollowing out Series B and C middle-lane deals. - 6. Locking capital in (Q1 2025).
145 mega-rounds captured 70% of dollars, largely driven by AI investments, while global deal count hit a nine-quarter low, proof of the barbell market. - 7. Expanding beyond traditional VC (2025).
Multi-asset mega-funds: a broader transformation across the venture capital landscape.
Multi-asset mega-funds with a new playbook: roll-ups, AI, and permanent capital
This shift from the classic VC model allows firms to invest not only in traditional VC but also in crypto, private equity, secondaries, and other emerging asset classes. This positions them more like modern wealth management offices, offering advisory capabilities and diversified asset strategies under one umbrella. They can invest in public equities and secondary shares, launch, build and roll up companies internally rather than just backing them, offer wealth management services to founders and LPs, and hold long-term, permanent capital stakes beyond the typical 10-year VC cycle.
Lightspeed Venture Partners' RIA registration, managing $31 billion in assets, is representative of this shift. General Catalyst's GC Wealth, with $2.3 billion AUM, and Andreessen Horowitz's expansion into wealth management and secondaries further illustrate this new multi-asset model.
Similarly, Thrive Capital's $1 billion Thrive Holdings is a permanent capital vehicle designed to acquire and build AI-native companies, holding them indefinitely. General Catalyst's Creation strategy deploys $1.5 billion to invest in and scale AI startups, often by acquiring their potential customers and integrating them into a broader ecosystem.
The blur
It is becoming clearer by the minute that the lines between VC, PE, and even corporate development are blurring fast. In a context of low M&A and IPO activity and market uncertainty, finding ways to convince LPs of the success of the asset class becomes of capital importance.
This evolution makes such firms increasingly attractive to Limited Partners. These firms deliver strong returns, offer liquidity, and operate with flexibility that aligns with the American model of multi-asset management. This trend is still relatively new, but it is gaining traction fast, especially among major U.S. asset managers who recognise the potential and are actively reshaping their business models.
The bifurcation: mega-funds versus niche specialists
Despite headlines about a VC freefall, the data tells a different, more nuanced story. Global venture funding hit around $120 billion in Q1 2025, the highest since Q2 2022, largely driven by mega-rounds like OpenAI's $40 billion raise. Even excluding outliers, funding remains robust, but the number of deals is falling. Capital, and wealth, is and will keep concentrating in fewer, larger bets, creating a winner-takes-most dynamic that leaves many startups and smaller funds struggling to keep operations running.
The industry is splitting in two:
- Mega-fund RIAs.
Diversified, multi-asset platforms with permanent capital and operational muscle. - Niche and solo GPs.
Focused, agile investors who continue traditional early-stage VC, often in specialised sectors. Read our analysis of the solo GP game →
The middle ground is disappearing. The number of active VC firms has shrunk by over 25% since 2021. Many mid-sized funds are becoming zombie VCs, unable to raise new capital or compete for deals.
Are LPs on board with this new trend, particularly in Europe?
Yes they are. European pension funds have invested in U.S. venture capital firms adopting the RIA model, but they have largely avoided similar investments within Europe. While U.S. firms raise capital through flexible, private market structures, European investors risk being left behind.
The European gap
European pension funds manage €3.5 trillion, yet only 0.01% is allocated to venture capital, citing risk, regulation, and lack of experience. This highlights a significant funding gap and untapped potential. Europe must support innovation. Pensions for Purpose and Venture Connections with European Women in VC studied pension fund participation in venture and growth investments; the findings are published in Venture & growth capital in Europe: mapping pension funds' attitudes.
Ending notes
VC isn't dead, but it is being played differently. The old VC model is fading, but venture capital as a force for innovation is alive and evolving. The winners will be those who embrace this complexity, whether as mega-funds building platforms or as specialists carving out new niches.
First appeared in our newsletter, June 2025.