The number of active U.S. venture capital (VC) investors has reportedly fallen since 2021.
That was a peak year for the VC world, but as the Financial Times (FT) reported Wednesday (Jan. 1), things have changed now that cautious financial institutions are shifting their money to Silicon Valley’s biggest startups.
Last year, 6,175 VCs invested in U.S.-based companies, down from 8,315 in 2021, the report said, citing data from Pitchbook. That has left power concentrated among a handful of big VC firms, leaving their smaller counterparts struggling.
In addition, the trend has offset the dynamics of the venture market in the U.S., letting companies like OpenAI and Striep remain private longer while cutting off avenues of funding for smaller firms, the FT added.
According to the report, more than half of the $71 billion raised by American VCs last year came from nine firms. Four of them — General Catalyst, Andreessen Horowitz, Iconiq Growth and Thrive Capital — raised upwards of $25 billion in 2024, while some smaller firms wound down.
“There is absolutely a VC consolidation,” John Chambers, former chief executive of Cisco and the founder of startup investment firm JC2 Ventures, told the FT.
He added that while companies like Andreessen Horowitz “will be fine and will continue,” VC that failed to secure big returns in the low-interest rate landscape prior to 2021 were going to struggle as “this is going to be a tougher market.”
The news comes weeks after a report from HSBC Innovation Banking showing that VC in the U.S. had shifted to investing in artificial intelligence (AI) companies at an “unprecedented” rate.
The bank’s quarterly technology sector report, “Innovation Horizons,” found that the scale of capital invested in AI startups by American venture investors is reaching that allocated to the rest of the venture market.
According to the report, 42% of U.S. venture capital was invested into AI companies in 2024, compared 36% in 2023 and 22% the year before that. As of 2024, 20 AI companies had each raised at least $2 billion.
“Venture capital has always gravitated toward transformative industries, but the level of consolidation we’re seeing within one category is unprecedented,” HSBC U.S. Innovation Banking Head Dave Sabow said in the release.
