LPs are the real decision-makers on capital allocation and almost all of them are pension funds. Pension funds have almost zero chance of staying solvent unless they can drive above market returns.
Right now that can be done on interest rates alone.
Zero interest rates meant they had to deploy capital, so many VCs were able to raise.
But most VCs will never get a chance to raise another fund.
Like you pointed out: don’t be fooled by all the info out there about how VCs’ think. Watch what they do.
Like everyone, when it’s not clear how to deliver an expected outcome they flock to “what everyone else is doing.”
Today that’s generative AI. It’s a lottery, a few VCs will get lucky.
But the volume of future capital available to raise has collapsed & there’s no indication it will recover.
Worse, incumbents have captured almost all the advantage of AI’s current capabilities.
So VCs are going to return to funding startups in their social network, for the “hot topic” they must have an allocation in to stay relevant, and put all their eggs in the safest (perceived) basket.
Most will be out of a job as soon when the money runs out.