Techstars CEO talks about “zombie” VC funds in CNBC interview
These are funds that cannot raise additional dollars to invest in new businesses, characterized as a "weird limbo."
Ever heard the term “zombie” applied to a venture capital (VC) firm or fund? Well, it was new to us until we came across this article that quoted Maelle Gavet, Chief Executive Officer of Techstars.
“We expect there’s going to be an increasing number of zombie VCs; VCs that are still existing because they need to manage the investment they did from their previous fund but are incapable of raising their next fund,” she said in an interview with CNBC. “That number could be as high as up to 50 percent of VCs in the next few years, that are just not going to be able to raise their next fund.”
What’s the definition of a zombie firm? It is one that is unable to raise funds to invest in new businesses, essentially locking itself into what was characterized as a “weird limbo.” The challenge stems from the massive boom in funding that tech-based companies saw during the height pandemic, but now that trend is in the rearview mirror with many tech companies seeing their valuations fall.
“This has had consequences for the groups that previously made heavy investments into them, as well as those hoping to raise funds in the future,” News Editor Donovan Erskine writes for Shacknews.