Venture Capital is Dead, Here is What Is Replacing It

South African-born venture capital (VC) titan Roelof Botha says the traditional VC model has reached breaking point, warning that it now represents a: “return-free risk” for investors and is being replaced by more durable investment structures.

Venture capital works on a simple premise. Investors back many early-stage startups in exchange for equity, expecting that a handful of winners will grow big enough to repay the entire fund through an acquisition or a public listing. Most startups fail, so the system only works when markets are strong, exits are plentiful, and a few companies generate extraordinary growth.

Botha who is part a long line of South African entrepreneurs who have made it big in the United States and is the grandson of former South African foreign minister Pik Botha, says that era has ended.

On the All In podcast he explained that the maths no longer adds up. Botha explained that the amount of money entering the VC industry exploded over the past decade. However, as he put it: “More money doesn’t create more great ideas.”

According to Botha the industry invests between $150–$200 billion a year, but to meet expected returns, it would need to generate several times that in annual exits. That would require dozens of mega-successes each year, but this is not possible, as the surge of capital into VC hasn’t produced a matching increase in breakout companies, creating a shortage of exits that leaves funds holding startups far longer than planned. As a consequence Botha says the asset class is starting to look like: “return-free risk.”

As pressure mounts, investors are shifting to very large private equity funds that operate on a different logic entirely. Private equity firms buy controlling stakes in established companies with real customers, real revenue, and predictable cash flow. They improve operations, cut waste, and expand into new markets before selling to another buyer or listing the company. Returns are steadier, and the risk profile is clearer. In 2022, private equity funds larger than $5 billion raised a record $445 billion.

VC firms are now adapting to survive. Many are abandoning the classic VC fund cycle and transforming into hybrid investment groups. Andreessen Horowitz, a former VC giant, has built a full-scale wealth-management arm. Sequoia, Botha’s own firm, has shifted to a structure that allows it to hold companies indefinitely. General Catalyst, another VC firm, now runs operating businesses, including AI ventures and even a hospital system.

The result is a fundamental reshaping of the investment ecosystem. The era of early-stage moonshots dominating the VC landscape is giving way to long-term capital platforms that buy, build, and operate companies across their entire life cycle. What was once a high-risk, high-velocity asset class is becoming slower, steadier, and more institutional.