Venture is Dead, Long Live Venture

AI supercycle meets liquidity bear trap, what's Europe's path to a trillion-dollar company?

Jun 30, 2025

(courtesy: Gustav Klimt, The Kiss, Österreichische Galerie Belvedere)

Have you played 2048?

The game where you slide tiles of 2, multiplying them until you reach the goal of 2048 and beyond.

Success in this game requires patience and strategic timing. Rushing your moves leaves you with a board full of 8s & 16s with no more space to multiply.

Silicon Valley started playing this game in the 70s with the advent of the semiconductor. Their companies have had decades to compound from small tiles into massive outcomes, from billion-dollar unicorns to trillion-dollar behemoths with the Apples, Googles & Metas of the world.

Meta took 17 years to achieve this trillion dollar milestone, Google & Amazon, 25 years, Apple? 44 years.

Yet 95% of VCs are out there fundraising for yet another 10-year successor fund as if we were still in the heyday of ZIRP, wondering why their LPs are reluctant to put extra cash in their new flagship and their returns profile hasn’t looked worse.

Welcome to Venture Capital’s metamorphosis - will the industry emerge from its liquidity-strained cocoon in time to capture the next platform shift?

Part I - Venture Capital’s Mid-Life Crisis

Venture Capital, the asset class as we’ve come to love it is 50+ years old.

As every asset class that’s worth its salt, it has a lifecycle of birth, growth, peak and maturity.

PE had its moment of peak and consolidation in the 90s & 00s, and perhaps we’re living through VC’s version of it.

We’re seeing multiple sides of the same equation:

VCs with 10 year old vintages are stuck, with their winners still private with no liquidity event in sight
LPs of all sizes have been “gavé” with VC allocations in the past decade but are currently overexposed to the asset class with liquidity lacking to reinvest
The unicorn nursery that had its heyday in ZIRP has now turned into a zombie unicorn daycare with sky high valuations, complexifying capital structures, and no way out
Secondaries markets that took birth during this time, are now booming to create opportunities to liquefy illiquid private markets
Funds are taking longer than the average 12-24mos to finish raising their flagships

Or as Bill Gurley says, “I think a lot of the components of the industry are bouncing into one another, and it's the aggregate effect of all those things that's super interesting”

1.1 Hips Numbers Don't Lie

Hamilton Lane's 2025 market data tells the story everyone's whispering to each other.

Distribution levels have cratered to "lows not seen since the GFC", the average distribution rate across private markets has collapsed from a historical 23% to meagre single digits. Fund distributions that should be cycling capital back to LPs for reinvestment have essentially stopped.

(source: Hamilton Lane 2025 Market Overview)

Even VC allocation pioneers like Yale are selling $6 billion in private equity. Harvard also dumped $1 billion in secondary positions. Universities issued $12 billion in debt during Q1 2025 just to meet capital calls.

To provide some colour, here’s what Meghan Reynolds, Head of Capital Formation at Altimeter has to say:

"A secondary sale with a big institutional LP like Harvard and Yale doesn't carry any big signal. It's just a natural way that institutional LPs 'clean out' their portfolio."

1.2 The Deployment Bear Trap

Here's what everyone missed while celebrating the 2021-2022 fundraising boom: deployment pacing predicted this disaster.

Hamilton Lane's data shows that roughly 70% of 2021-2022 vintage funds deployed more than 50% of their capital before inflation and interest rates spiked. History rhymes with precision, the same rapid deployment pattern before the GFC correlated directly with underperformance across every strategy.

Now layer in the coverage ratio crisis. Portfolio companies that thrived in zero-rate environments are suddenly servicing debt at 5-7% while trying to maintain growth investments. Fund managers are left praying valuations grow fast enough to mask the deterioration.

Little wonder why everyone’s been holding on to their pearls…

1.3 What Smart GPs Are Actually Doing

While everyone debates LP preferences and market conditions, the most sophisticated players are quietly restructuring their entire businesses.

Andreessen Horowitz became a Registered Investment Advisor in 2019. General Catalyst followed. Then Lightspeed in 2024. This isn't a coincidence.

The RIA status is about structural transformation. One where retailisation and maturity of the private assets playground sends a strong signal to the industry.

In addition, Sequoia transitioned to an evergreen fund model in 2021, that has now grown to nearly $20bn according to an SEC filing.

These moves enable massive vehicles (evergreen or not) that deploy across multiple sub-strategies simultaneously, bypassing the 20% limit on "non-qualifying" investments, and hold positions indefinitely without artificial exit pressure.

Closer home, General Catalyst acquired La Famiglia, Molten Ventures acquired Forward Partners and Elaia entered into an exclusive partnership with Lazard to create a growth vehicle and had Lazard buying a minority stake in Elaia. Not only that but multiple minority GP stake sales and secondary sales have kept many a VC ready to brave the storm.

Part 2 - The AI Supercycle

Coatue recently had their East Meets West Conference, where the Laffont brothers spoke to us about the supercycles that have dictated technology investing since its inception in the 70s, from Semiconductors, all the way to the Internet, Mobile, Social Media, Cloud/SaaS and now AI, the latest and potentially greatest yet cycle.

The recent figures we’ve been seeing from AI champions, achieving revenue growth in 12 months what would’ve taken SaaS companies 10 years to achieve is nothing short of breathtaking which may lead you to believe that the frothy valuations are justified.

(source: Coatue EMW 2025 Conference Deck)

But Philippe mentioned, market sentiment doesn’t always correlate with market performance and more often than not it’s the opposite. While the supercycle narrative neatly tucks everything into waves that supersede each other, the moment we’re living suggests a more complex reality.

In my opinion (and many others’ much smarter - and much better capitalised), this AI breakthrough interrupted a much needed clearing out of venture capital’s weeds.

2.1 The Interrupted Correction

We all remember 2021 when the economy was booming and everyone’s mind was on “diamond hands” and getting a hold on the latest Bored Ape NFT, and we also remember when Jerome Powell started his infamous rate hike cycle in March 2022, relentlessly hiking rates from 0.25% pre-March 2022 to 5.50% by the end of July 2023.

What this did to the private markets is a 60% slump in deal value in 2023 compared to the peak in 2021. Looking closer, venture capitalists who raised their ginormous flagship funds in 2020 & 2021 now had nowhere to deploy as the wells dried up and there was a sharp flight to quality, the likes of which I had never seen (it’s only fair, only crisis I vaguely recall is ‘08).

This led to a pause in deployment of these massive funds, with some choosing to downsize their funds to better reflect the times, others holding on to their pearls. Which in turn led to discussions around a much needed consolidation of the industry, as we saw in 2024.

Although this should have lasted for at least a year or so more, no matter how painful it was (tell me about it, it was my first time fundraising…plus a first time fund and a first time team) there was a blinding light at the end of that dark and gloomy tunnel.

This blinding light (or rather knight in shining armour) was none other than OpenAI and their GPT & DALL-E models releasing in 2020, 2021 & 2022, reaching a million users in 5 days in November 2022.

(illustration of a knight in shining armour)

What then followed was a frenzied deployment of all the dry powder raised in 2021 ($685 bn!!!) into the hottest, fastest growing startups we have seen to date (c. $140bn in 2022-23, $110bn in 2024, $113bn in Q1 2025 alone), thus kickstarting the AI Supercycle and simultaneously interrupting the clear out that VC needed.

But redirecting capital doesn't resolve structural problems, it only postpones them. The AI supercycle may be real, but it's also masking the fundamental issues that created the correction in the first place. And like every platform shift before it, this one will eventually separate the wheat from the chaff, leaving most players wondering where the music went.

2.2 The Great Talent Re-Allocation

Look, I'm extremely optimistic about the Agentic AI revolution automating all the soul-crushing maintenance work that's been keeping brilliant engineers stuck in digital drudgery. And here's the kicker: guess where you find the highest concentration of technical talent trained in the exact problems AI still can't crack? Europe.

While the Valley's been optimising ad clicks and investing in influencers, we've been quietly building the world's deepest bench in materials science, precision manufacturing, industrial systems. As AI frees up this talent (and the capital of successful technical operators), it's all flowing toward the hard stuff: climate adaptation, advanced materials, precision medicine. Europe's natural advantages in research infrastructure suddenly look a lot less boring.

2.3 🇪🇺 European Exceptionalism

Before you roll your eyes at another "Europe can compete" take, here's what's actually happening: this talent reallocation is compressing 25-year development cycles into 15-year timelines.

We're seeing weak signals everywhere—1KOMMA5° scaling distributed energy in five years instead of fifteen, Helsing building defense systems and deploying them to the frontlines faster than most companies build MVPs, Verkor speedrunning from battery chemistry to gigafactory, etc.

The thing is, fifteen years sits right at the edge of what venture capital can stomach. Gone are the days of Fairchild Semiconductor giving birth to Intel, Moore's Law, Sequoia and Kleiner Perkins. But maybe that's exactly what we need—venture's rebirth for an era where the hardest problems are finally becoming venture-scale problems.

(source: Wikipedia, The Traitorous Eight)

Part 3 - Making the Case for Evergreen Venture

We've established that venture capital is having a mid-life crisis just as the most interesting opportunities in decades are emerging. AI compressed hard tech from "too long to care about" and “philanthropy” to "almost venture-scale but not quite."

The timing is almost comedically perfect. Europe has the talent, research infrastructure, and compressed timelines that make hard tech actually investable. Meanwhile, traditional VC is stuck desperately trying to exit 2015-2018 vintage investments while pretending the old playbook still works.

But structural mismatches don't solve themselves. The evergreen model isn't some elegant theoretical solution—it's just the only math that works when you stop pretending venture timelines and innovation timelines are the same thing.

3.1 Goldilocks Zone

ELTIF 2.0 regulations went live in January 2024, creating the world's most sophisticated framework for evergreen structures.

Here's the tell, while traditional fundraising collapsed 50% from peak levels, evergreen structures exploded. The European evergreen market grew from €53 billion to €63 billion in a single quarter:

18% growth in 90 days while traditional funds extended timelines and cut targets.

But regulations are just plumbing. The real signal is where the talent is moving.

Traditional VC also faces an existential retention problem: every successful partner eventually leaves to start their own fund. Why suffer through years of fundraising when you can focus on investing? Why give up network effects and operational leverage for the ego satisfaction of having your name on the door?

The bifurcation is accelerating. The 5% who understand what's happening are raising capital faster than ever. The 95% who don't are extending fundraising timelines and cutting target fund sizes.

Evolution doesn't wait for consensus, and my money is on increasing evergreen venture funds in Europe, because this porridge is just right.

Conclusion

Europe started its sourdough starter (the VC industry, catch the drift) about 15 years after the Americans, but the culture is finally maturing.

You can see the gluten development everywhere — Zurich/Munich’s robotics ecosystem, Paris's agentic AI clusters, Estonia's defense tech, the Nordics' climate solutions, London’s fintech giants. The windowpane test is looking promising: stretch the network thin and it doesn't tear.

But here's the problem: rising temperatures, metaphorically AND literally.

Any baker will tell you that sourdough is finicky about heat.

Europe's dough is finally developing proper structure. The specialised talent clusters are like gluten strands, creating the elasticity needed to support something substantial. But if we let the AI heat wave convince us to rush the timeline, we'll end up with overproofed mush.

Americans can afford to experiment, they've got multiple loaves going in terms of trillion dollar companies (cough Mag7, cough). Europe has one shot to get this right and as the better bakers, we cannot have them take the bread ($$$).

The question isn't whether our starter is viable. It's whether we'll have the discipline to proof it properly while the kitchen's getting hotter by the day.

I’m curious to hear what you think of this essay, feel free to like and comment below.

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