We’ve seen recently that a number of venture firms are looking to acquire mature businesses and apply AI to drive growth and efficiency. That speaks to the opportunity that we see in this latest revolution, and we expect to see more of this type of activity going forward. While much of the reporting has focused on this as a reason for VCs to enter private equity, I also see a structural aspect of venture that I believe will compel firms to move into private equity; namely, the structural imbalance between the number of startups that venture firms have invested in relative to the rate at which these are being acquired.

To set the stage, recall that the best companies in venture drive the majority of returns in the industry. The attempt to invest in and build those companies - which typically scale past $100mm in ARR and keep growing with increasingly efficient unit economics - has led VCs to fund a significant number of companies. 

A query of PitchBook’s data shows over 54k VC-backed companies in existence in the US, with 28k seed companies, 14k series A companies, 6k series B companies, 2.8k series C companies, and 1.2k series D companies as of May 2025. Contrast the sizable inventory of startups with the more tempered pace at which exits are happening as seen in the graph above, showing the number of exits by stage for VC-backed companies over the last decade.

How Long Could it Take to See VC-Backed Companies Exit?

If we contrast the inventory of companies with the number of exits at their respective stages, this has averaged over the last decade around 200 Series A company exits per year, 130 Series B company exits per year, 80 Series C company exits per year, and 90 Series D (or later) company exits per year. At that rate, considering just the most mature companies at the Series D stage, we would need about 1.2k / 90 = 13 years for these companies to exit. If we look at the inventory of current Series C stage companies, the historic exit rate would imply roughly 35 years to remove the backlog of VC-backed companies.

Exits for startups typically come from getting acquired by a strategic or a private equity fund or going public. When looking at the distribution of exit types, we find that the average exit path over the last 10 years has been 73% acquisition, 19% buyout by a private equity firm, and 8% IPO. In past analyses, we’ve also seen that a meaningful percentage of startups at each stage either go out of business or continue on as private companies without raising subsequent rounds of financing.

If the volume of exits is not there, could the values associated with exits tell us something different? What we look at exits by dollar value, we find that the source of the best returns - the IPO market - has been effectively closed the last few years. IPOs generate the best outcomes in terms of total market capitalization, but the window at this point has closed for all but the largest startups.

Given the longer hold time for companies, we’ve already seen venture firms exercising fund extension rights with limited partners as well as establishing continuation funds to keep investing in portfolio companies. We’ve also seen venture firms increasingly look to sell stakes in their portfolio companies to secondary buyers as a way to generate distributions to limited partners.

The problem with these solutions is that they don’t match the scale of the inventory of good companies that exist. I believe that the natural evolution of venture will be to build out private-equity-like capabilities, whether through the addition of teams with PE experience or by raising funds specifically focused on rollup strategies. In effect, venture funds will move to a model where they can sponsor their existing companies to grow through acquisitions and drive scale and efficiency.

For entrepreneurs, this means that the exit strategy could increasingly be a focus on identifying complementary startups that they can merge with as part of this evolution. This trend has already begun over the last several years, and may become a meaningful exit path as venture funds increasingly look to drive scale and ultimately exits for their portfolio companies.

This is by no means an easy path, however. Venture companies tend to be concentrated in waves. At one point in the past we had identified at least 29 venture-funded antivirus software companies competing for that market. Today we see similar volumes of new companies being funded in similar markets in the current wave of AI companies. Building and scaling defensible data or distribution strategies and meaningful market shares will be required for this type of transition into more of a private equity-type model to work. We expect to see operators from private equity firms be brought onboard by the larger venture funds given the scale of the capital tied up in their portfolios over time. We’ve already seen investment bankers hired into capital markets or advisory roles at the larger funds, and I believe this type of rollup persona will become increasingly common in the years ahead. While there are plenty of opportunities to buy mature companies and drive efficiencies via AI, I believe the imbalance between the supply of good companies versus the volume of exits will by itself drive the transformation of our industry.

Will VCs develop their own private equity capabilities as a means of driving more exits int their portfolios?  As published originally on Forbes, the numbers present a compelling case for why this might happen.

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Set in the heart of the city, the event was more than just a social gathering — it was a reflection of Thomvest’s long-standing commitment to people and ideas that drive progress. Attendees included early-stage founders, operators, and fellow investors, all aligned around the shared goal of building and scaling meaningful ventures.

From casual conversations to insightful discussions about market shifts, AI, fintech, and responsible capital, the energy in the room reminded us why we do what we do: we invest in people first.

For over 25 years, Thomvest has quietly partnered with exceptional teams to help them navigate risk, think long-term, and reach outsized outcomes. Events like Midtown Happy Hour give us the opportunity to celebrate that journey — not just with term sheets, but with real conversations and genuine collaboration

We’re grateful to everyone who joined us and look forward to continuing the dialogue in the months ahead.

On March 27th, 2024, Thomvest gathered founders, investors, and long-time collaborators for a special Midtown Happy Hour — an invitation-only evening dedicated to building stronger relationships in the innovation and investment community.

Midtown Happy Hour: An Evening of Connection & Opportunity

Why Professional Development is a Startup Superpower — A former boss of mine always said, "More sweat on the training field, less blood on the battlefield." This long-term mindset is essential for startups. As your company grows, so must the skills of your team. The time to build those skills isn't when a crisis hits — it's now. By planning ahead, you can identify what skills your company will need in six months or a year and start preparing your team accordingly. This proactive approach gives your startup a competitive edge while boosting employee satisfaction and retention.


Create A Professional Development Plan For Each of Your Employees — To make it easy for you to get started, I've attached a pro forma version of a professional development plan I've used for myself and numerous people I've managed. Click on the template. I'll walk you through the various elements you and your employee should first discuss and then fill in:

Training Process — This confirms the time period the employee will work with their manager and how often they will review progress made against this plan (as well as where additional effort is needed). Most professional development plans are on a year-long basis but can be for shorter periods if accelerated training is required.

Overall Training Objective — The employee and their manager must be thoughtful about identifying the "big idea" regarding where they want to focus the employee's training efforts. Realistically, the employee will only be able to tackle one or two of these overall training objectives in a year. Some examples of these include:

Develop Executive Presence — Enhance communication, persuasion, and influence skills.

Improve Strategic Decision-Making — Apply structured decision-making frameworks in key business decisions.

Strengthen Team Leadership — Implement leadership coaching and improve team engagement.

Master AI-Powered Marketing Analytics — Leverage AI concepts and tools to improve campaign effectiveness.

Since I'm familiar with marketing, I will use the last example of an overall training objective ("Master AI-Powered Marketing Analytics") for this article. I could have used any of the other examples (and many others) as a starting point, depending on what the employee and their manager want to focus on.

Performance Expectations— This takes the employee's overall training objective and breaks it into more manageable areas to focus on. For example, if the overall training objective is to master AI-powered marketing analytics, your performance objectives could include the following:

Learn statistical and machine learning concepts relevant to marketing analytics (e.g., predictive modeling and customer segmentation).

Conduct a pilot project using AI analytics to optimize audience targeting and content personalization.

Develop a reporting framework to measure AI-driven campaign performance and make iterative improvements.

Training Steps — This is where the development plan gets even more granular in terms of the specific training steps and actions the employee will take (with the help of their manager) to master the overall training objective and performance expectations. Continuing with the example from above, this might include the following details:

Enroll in a course or workshop on AI marketing platforms (e.g., Google Analytics 4, HubSpot AI, ChatGPT for marketing, Adobe Sensei, etc.).

Complete practical exercises using AI-driven insights to optimize real-time marketing campaigns.

Obtain certification in at least one AI marketing tool to validate proficiency.

There has never been a better time to access different ways to complete training on various skills and topics. Affordable​​ e-learning, virtual training, and AI-driven platforms have surged, reducing dependency on in-person workshops.

Mentors in your company and the industry are another valuable resource. Hundreds of online courses are available — one of my favorites is www.sectionschool.com. Your employee can also join professional networks, and assuming the company is willing to invest in this as a resource for the employee, there are individual coaching and team coaching opportunities.

What The Manager Will Do—The company must prioritize employee training, and managers must commit in writing to working closely with their employees on their development plans. Having worked with many outstanding employees over the years, I have witnessed employees often master new skills and take on new responsibilities based on their professional development plans. However, the employees' progress and development will suffer unless their manager is willing to take the time and effort to support them.

Projects and Initiatives Offering Training Opportunities — Learning a new skill is not enough — the employee needs to implement it in the business to master it. Once the employee and manager have agreed on their overall training objective, performance expectations, training steps, and what the manager will do to support them, they should spend time identifying ways the employee could apply these skills to grow the business.

For example, continuing with the example from above, the employee could develop a plan to analyze which aspects of the company's marketing programs could be improved via AI and start a test to prove the value of this before full implementation.

Plan the Work, Work the Plan — In the rush to do everything a startup needs to do, it takes a lot of discipline and focus to create a professional development plan for employees and their managers and to implement it closely with them.

Investing in employee growth doesn't require significant capital—just time, effort, and commitment. Developing professional development plans for your employees will require considerable work from your team. I suggest initially having several employees utilize a professional development plan with their managers. After a few months, get their feedback, and then, based on their results, consider leveraging it for the rest of your company.

The payoff? A more capable, motivated team that stays longer and contributes more to your startup's success. Incorporating this development opportunity for your employees will enhance your company's overall success while increasing their satisfaction and professional growth. It will also give your company a competitive advantage that will grow over time.

Thomvest works with founders and business leaders who have created industry-leading companies in fintech, proptech, cloud infrastructure, and cybersecurity. If you are an early-stage founder in one of these areas or if there is something we can do to help your startup succeed, don't hesitate to contact me at kip@thomvest.com.

One of the biggest challenges for startup teams is the constant need to wear multiple hats. Startups with limited resources and a small team often must take on responsibilities beyond their initial skill sets. The best way to navigate this challenge is to implement structured professional development plans that help your team learn as they grow.

How A Development Plan Can Enhance Your Team's Capabilities And Increase Employee Job Satisfaction

Don Butler speaks to why AI may be a bigger shift than the internet for venture capital.

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