Whose warning reshapes industry core?

TL;DR
A sharp warning is shaking up the funding world because it exposes that the structure of the venture capital industry itself may be broken. For companies seeking capital, this means thinking beyond traditional VC – adapting to transitions in regulatory expectations, investor demands, and old models that no longer deliver.

Why the VC “Structure” is Under Attack

Here’s the thing: these industry-wide warnings aren’t just noise. They’re pointing straight at how venture funding is set up—the connections, the rules, and what everyone expects. They dig into stuff like:

• How investors find deals, often leaning on referrals more than actual performance. Flawed Foundations: Venture Capital Due Diligence and Systemic Inefficiencies
• Accountability standards, especially now that public markets, regulations, and capital flows are shifting. The Metamorphosis: How VC Funds Are Evolving and Stepping Away from the Classic Model
• How investor and founder goals line up, particularly as VCs take on new roles and change their game. The Metamorphosis: How VC Funds Are Evolving and Stepping Away from the Classic Model

A clear example? Firms like Lightspeed and Sequoia no longer act just like traditional VC funds. Instead, they’re evolving into powerful platforms that buy public stocks, adopt evergreen fund models, and invest in companies far beyond their startup days. Calcalist: VC Funds Evolve into Evergreen Platforms

What the Warning Means for Companies Seeking Funding

When people talk about the “structure” being the problem, they aren’t referring to something temporary. No, it means startups have to shift their thinking and strategy, too.

Match Investors Who Get the New Rules

Old-school VCs usually expect a 5 to 7-year exit through IPO or acquisition. But guess what? Many are now acting more like hedge funds, private equity firms, or public asset managers. Calcalist: VC Funds Evolve into Evergreen Platforms They might want earlier revenues, stricter governance, or longer hold periods.

Take Sequoia, for example. They combined funds into an evergreen setup, meaning there’s no fixed end date. For founders, this changes when and how pressure builds. Just keep in mind: if you’re not clear on your investor’s timeline, you could end up misaligned later on.

Focus on Transparency, ESG, and Real Metrics

I’ve found that regulators and investors are tired of glossy pitch decks. They want hard data: on geography, diversity, and environmental footprint. Plus, clear terms about shares, dilution, and cap tables. Demonstrating actual traction matters way more than just promising future buzz.

A recent study revealed that less than 1% of deals convert and over 30% come through networks. That means missed chances and weak returns—something worth remembering when you’re picking partners. Flawed Foundations: Venture Capital Due Diligence and Systemic Inefficiencies

Understand Exit Realities and Timing

More startups stay private for longer these days. IPOs are becoming rare, and secondary markets are stepping up to fill the gap. Calcalist: VC Funds Evolve into Evergreen Platforms

So, companies need to plan for:

• Funding rounds involving non-traditional investors.
• Liquidity events that aren’t IPOs, like secondary sales.
• Governance that suits long-term backers.

Real Examples of Structure Shifts

• Lightspeed Venture Partners got registered as a Registered Investment Advisor (RIA), which lets them play in public markets, do secondary deals, and handle buyouts—not just early-stage investing. The Metamorphosis: How VC Funds Are Evolving and Stepping Away from the Classic Model
• Thrive Capital recently raised $1 billion aimed at building and acquiring AI-native companies. They’re not just funding; they’re actually creating. The Metamorphosis: How VC Funds Are Evolving and Stepping Away from the Classic Model
• Venture funds overall are seeing value drops and fundraising hitting decade lows. LPs are getting pickier. In Q1 2025, only 231 funds raised $18.7B globally—definitely a contraction. Calcalist: VC Funds Evolve into Evergreen Platforms

Signs You’re Out of Sync with the New VC World

Watch for these warning signs:

• Investors promising a lot of process but leaning heavily on friendships or referrals.
• Confusing cap tables with unclear share classes or board control.
• Pressure to exit quickly when your product or sector needs more time to mature.

Steps Companies Must Take to Thrive

Here’s where things get practical. These steps can help you work with the new system instead of fighting it.

1. Pick investors who match your timeline
   Raising cash isn’t enough. Choose folks who get your long development cycles or complex markets.

2. Get your metrics sharp
   ARR, burn rate, retention—make them easy to understand and verify.

3. Start building governance early
   Nail down terms, board seats, investor rights. Transparency builds trust.

4. Explore alternative funding routes
   Think secondary markets, strategic corporate investors, or revenue-based financing.

5. Keep an eye on regulatory changes
   Tax laws, ESG rules, equity regulations—they all impact your valuation and risk. Investment Banking: Regulatory Changes Impacting VC Investments in 2025

FAQ – What Founders Ask Most

Q: Is the traditional VC model obsolete?
A: Not exactly. But it’s evolving fast. Hybrid models like evergreen funds and public-private mixes are on the rise. Sticking to old ways could leave you behind.

Q: How do I tell if an investor’s structure is outdated?

• They dodge sharing metrics.
• Expect exits in 3–4 years regardless of your product’s timeline.
• Rely mostly on meetings and handshakes, rather than data.

Q: What new structures are emerging?

• Evergreen funds without fixed deadlines.
• RIAs moving into public equities.
• Corporate VCs and strategic buyers.
• Secondary investors buying late-stage stakes.

Q: How does regulation affect fundraising?
You’ll face tougher due diligence, ESG disclosures, and equity reporting. Investors might ask for proof of environmental impact and diversity. Skipping these can stall your deal.

How to Position Your Company for Success

To stand out, lead with clear pitches showing traction, governance, and strategy. Be honest about your needs—timeline, exit preferences, and support required. Find investors who already know your sector’s long haul, like biotech or climate tech. Legal advice is key to ensure your contracts reflect today’s expectations.

If you adapt to these shifts in the industry, you won’t just survive—you’ll help shape the future of funding. I’m always happy to help if you want to review terms, select investor types, or build metric dashboards step by step.