The venture capital landscape is undergoing a significant transformation. While firms are continuing to raise early-stage funds and invest in technology moonshots, some of the leading VCs are embracing private equity-like structures, using continuation funds, taking equity control through buyouts, and diversifying their investment activities. This shifting identity is being driven by a slew of macro factors: the changing exit environment, LP demands for liquidity, and a new playbook for how entrepreneurs are growing their companies. 

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In this article, we’ll explore each of these trends, along with how VCs are implementing PE-like systems, and what this could mean for the future of the industry. 

Why the venture capital model is changing

When global capital markets took a sharp downturn in 2021 (public markets) and continued in 2022 (private markets), expectations had to be reset across the industry. Capital became scarce, and founders, GPs, and LPs all needed to re-analyze how they were spending and investing the money they had. 

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The exit window disappeared for many companies, while LPs were simultaneously looking for distributions faster than what had previously been occurring. Founders were instructed to build with leaner teams, leverage technology, and get to profitability. 

Exit volume is not what it used to be 

For most of the last decade, venture capital relied on predictable exit pathways: successful companies would raise several rounds of capital and either go public or be acquired, allowing funds to return capital to LPs within a 7–10 year lifecycle.

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But global VC-backed exit activity has slowed significantly. While there are signs of recovery in M&A transactions in 2025, the past few years have been bleak. According to EY, global IPO activity counted 1,200 transactions and $120 billion in volume in 2024, far below 2021’s peak of ~2,400 IPOs and over $450 billion in IPO volume.

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This prolonged reduction in exit opportunities has created a bottleneck in capital recycling. VCs can’t distribute returns without exits, which in turn makes it harder to raise new funds. It’s forcing firms to rethink their organizational structures, timelines, and liquidity options, many of which now resemble the mechanics traditionally used in PE.

LPs want liquidity sooner

Limited partners, like pension funds, endowments, and family offices, have long accepted that their investment capital is illiquid and locked up for long durations (typically 7-10+ years). But after recent years of declining distributions and markdowns from the 2021 highs, LPs are rethinking their return expectations and growing increasingly eager for liquidity. 

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At the same time, a variety of alternative asset classes (e.g., direct investing, real estate, digital assets) are now offering compelling return profiles to investors as competition for LP capital is on the rise.

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This pressure has led VC firms to explore new tactics, like continuation funds, secondary sales, and hybrid vehicles that let LPs cash out early.

Fund cycles are lengthening  

Historically, VC fund cycles have followed a roughly ten-year arc. But as exit timelines extend and capital remains tied up longer, those timelines are extending. PitchBook reported that the median time to exit for VC-backed companies is now ~9 years, up from roughly 6.5 years in 2010. With a significant amount of private market value locked up in late-stage unicorn companies, the delay in an exit continues to delay a lot of that investment value being returned to GPs and LPs. 

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As a response, firms are extending their fund lifecycles, selling positions to continuation funds, and exploring NAV loans.

Founders are building more resilient companies 

At the same time, startup behavior is shifting. Founders today are more focused on capital efficiency, leaner teams, and early profitability. 

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In response to a more conservative funding environment, startups are tightening their burn and extending their runways. Hiring is expensive, and companies across growth stages and industries are doing more with less. They’re also leveraging better technology and new AI tools to grow more efficiently.

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As startups move toward breakeven earlier, the traditional “grow at all costs” VC model looks increasingly out of date. This leads companies to control their own destiny, which can mean staying private longer.

How VCs are beginning to look more like PE

Fund structures and regulatory shifts

Top venture firms are increasingly registering as RIAs (Registered Investment Advisors). Lightspeed, Andreessen Horowitz, Sequoia, General Catalyst, Thrive, and others are now RIA-registered. This allows these large, multi-billion-dollar firms to invest across more asset classes outside of private markets, hold their positions longer, and pursue other revenue streams like wealth management. 

Operational involvement and active governance

Today, many firms are embracing deep operational control and active governance, stepping into roles more common in private equity, to drive long-term value and scalability in later-stage portfolio companies.

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Firms are demanding board control, operational oversight, and, in some cases, orchestrating platform roll-ups (where an investment company acquires a large company [the “platform”], and then acquires smaller companies within the same industry to grow and consolidate the company’s market position) similar to PE. 

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A prime example is General Catalyst, which recently, under its “Health Assurance Transformation Company” (HATCo) initiative, paid around $485 million to acquire Summa Health, a multi-hospital chain, using capital outside of its traditional venture capital business. This marked a bold move to actively oversee operations, consolidate healthcare assets, and build a durable business. 

New approaches to liquidity

Continuation vehicles, having always been popular in private equity, are a new solution to liquidity needs in VC. These vehicles allow venture firms to carve out selected assets from an aging fund, typically later-stage, high-conviction companies. LPs then choose to cash out or roll over into the new vehicle, providing liquidity without forcing a sale or endangering future upside.

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One recent example is Lightspeed Venture Partners, which in 2024 raised a $1 billion continuation fund aimed at a portfolio of ten of its mature tech companies. The vehicle would allow early investors to receive sale proceeds without triggering a full exit, while letting Lightspeed retain its upside in the company.

Where is the industry heading?

While some of the industry’s most prominent firms are adopting private equity-like structures and strategies, this evolution represents a shift for just one corner of venture capital, not the whole ecosystem.

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Early-stage investing will continue to operate with the same risk-taking model that has long defined VC. These firms thrive by being close to founders, backing companies before or alongside early traction, and leaning into conviction investments.

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But among the largest, multi-stage venture firms, a different path is emerging. These firms, in part, are starting to build platforms. They manage billions of dollars, invest across the capital stack, and incorporate diversified strategies like continuation funds, NAV lending, and portfolio diversification across new asset classes. Their approach looks more like asset management than traditional venture capital.

Some of the shifts we could see among these larger, hybrid firms include:

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• Sector-specific roll-ups (e.g., fintech, healthcare, infrastructure) to consolidate fragmented markets
• Dedicated secondary funds for structured liquidity without relying on IPOs
• Public/private crossover investing to stay involved through and after exit
• M&A-led growth strategies, where firms actively acquire and integrate startups

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This isn’t the end of traditional VC, it’s the emergence of a parallel playbook tailored to a different scale and set of LP pressures. For founders and LPs, the key will be understanding which kind of firm they’re working with, and what that implies about the firm’s incentives and structure. 

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