Sequoia partner says there's too much venture capital and not enough companies to invest in: 'It's a return-free risk'

"I think there's a huge problem with the venture industry. There's too much money,"

"Investing in venture is a return-free risk,"

"You'd need 40 Figmas a year for the industry to make the returns work,"

"I don't think venture is an asset class. It doesn't support the numbers."

There is too much money in the venture industry, causing difficulty achieving expected returns. Venture capital deploys over $150 billion in companies annually. Even under reasonable return assumptions, current capital deployment outpaces the number of profitable, high-exit companies needed to justify those investments. The industry would require roughly 40 companies with Figma-like exits each year to make returns work. Historically, about 20 companies per year generate exits of $1 billion or more. Talent allocation is spread thin across many startups, and the IPO market has cooled compared with 2021.

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