A wave of partners are leaving blue-chip firms to join emerging funds or start their own. Meet venture’s new guard.
By Alex Konrad, Forbes Staff
After former Facebook product leader Mike Vernal left Sequoia in 2023, he spent a lot of time considering the ideal strategy for a new venture capital firm to win deals and quickly establish itself. His solution: “Pick a trend that is going to matter a lot, that will be defining over the next decade and become the top manager in the space.”
Ribbit did it in fintech last decade, backing breakout companies like Coinbase, Nubank and Robinhood, scoring Micky Malka a spot high atop the Forbes Midas List. Paradigm cracked it in crypto, making savvy bets on Bitcoin and Ethereum as well as startups Chainalysis and Uniswap. With the rise of generative AI, Vernal was certain he knew the emerging winner of venture’s next shakeup: Conviction founder Sarah Guo.
Not long ago, Guo was still an up-and-comer, a young partner from a new generation at blueblood firm Greylock who struck out on her own and announced a $115 million, AI-focused first fund just weeks before OpenAI released ChatGPT and kicked off a speculative frenzy. She’s since written early checks to AI startups whose valuations have since soared into the billions, including Cognition, Harvey, Mistral and Sierra, and launched a popular AI-focused podcast, ‘No Priors’, with technologist Elad Gil. “She’d clearly become one of the smartest and best-networked investors in AI,” said Vernal.
After months of co-working to see how well they might work together, Guo tapped Vernal, an investor in billion-dollar startups Clay, Notion, Rippling and Verkada, as Conviction’s second general partner. The duo have now raised a $230 million second fund, they told Forbes exclusively. It’s twice the size of Conviction’s first and enjoyed an even smoother process to raise than its predecessor, according to Guo. “We had a privileged time of it with both,” she said. “But the first time, there were questions about how much the access and ability to invest is tied to being part of a large platform.” The second time, not so much.
Conviction’s partner addition and upsized second fund – early word of which was previously reported by The Information in November – are the latest indicators of a trend that’s been the subject of boardroom conversations, industry holiday parties and group chats in recent months: a sea change among venture capital’s partnerships bigger than any the industry’s seen in years. For months, and especially during the recent holiday season, partners from decades-old firms and new establishment heavyweights took to LinkedIn and X to announce they were moving on to a new thing.
To name just a few in a long list: Alex Taussig and Nicole Quinn from Lightspeed; Matt Miller from Sequoia; Sriram Krishnan and Michelle Volz from a16z; Bilal Zuberi from Lux Capital.
Some, like Quinn, who remains part-time at Lightspeed, and Krishnan, who was recently appointed a policy advisor to the Trump White House on AI, may not be looking to set up their own shingle just yet. But plenty are. Volz is working on a solo partner pre-seed and seed-stage fund, a source with knowledge of her plans said; it will be focused on ‘American Dynamism,’ a term coined by her former employer broadly including sectors related to the national interest like aerospace, defense and manufacturing. Volz didn’t respond to a comment request. Zuberi, who has not yet formally left Lux, said he plans to launch a firm focused on seed and Series A deals at the intersection of AI and the physical world. “I believe some senior GPs [general partners] are realizing that their passion, and expertise, lies in early stage true venture, which is a bit different than what many multi-stage firms do,“ Zuberi told Forbes.
And more are coming. At Forerunner Ventures, partner Brian O’Malley recently transitioned to board partner, per the firm’s website; Lately, he has been taking meetings about potentially raising his own fund, two sources said. At Index Ventures, partner Damir Becirovic recently left to work on a new firm, three sources said. He updated his LinkedIn title to cofounder at Relentless, a new venture brand “for the most ambitious only.” O’Malley and Becirovic did not respond to comment requests. Neither departure has been previously reported.
“I think a new guard is forming,” said Chemistry cofounder Kristina Shen, who announced her firm’s $350 million debut fund alongside cofounders Mark Goldberg and Ethan Kurzweil – veterans of a16z, Index Ventures and Bessemer Venture Partners respectively – in October. “I wouldn’t be surprised if you see more departures in 2025 than in the past year.”
Every boom-and-bust cycle of venture sees its share of legends who hang up their spurs, hotshots who set out to compete with their old bosses, as well as a share of laggards who quietly churn out of the most sharp-elbowed shops.
Even so, multiple capital allocators at prominent institutions like endowments who spoke to Forbes, mostly anonymously as they were not authorized to speak to press, said they’ve noticed a significant shift in the past year or so compared to the usual musical chairs. “It’s hard to pinpoint, as the data would suggest there aren’t that many net new funds total,” said one. “But the quality of people involved feels like a real change.”
Why exactly a partner might leave a VC firm can be difficult to pin down at an individual level. Each relationship has its own politics, economic wrinkles and back story. Like with a romantic relationship’s breakup, different versions of any specific departure might make the rounds, depending on who you ask: a firm might feel incentivized to downplay their loss of talent; a partner might feel pressure to exaggerate their previous standing.
But whether they jumped from an established firm or were pushed, investor departures can generally be attributed to two concurrent issues facing the industry in 2025: evaporating financial incentives and bloated partnerships.
For strong performers with promising track records, compensation is creating widespread restlessness. As funds have grown larger at many firms, a partner’s share in the expected profits can have less motivational impact. Their portion of the carried interest, known as carry, often only begins to pay out after the limited partners putting up most of a fund’s money get paid back. In a multi-billion-dollar fund, doing so is no small task. Nosebleed startup valuations from the zero-interest rate, fast-paced investment climate of 2020 and 2021 make the challenge more daunting.
“You don’t really want to leave a fund when it’s sitting up 3x, 4x or 5x,” said Ed Zimmerman, a partner at law firm Lowenstein Sandler who regularly works with investors to negotiate their exit deals. But some outsized funds might be lucky to double their money or even make it back. “We have definitely heard over the last year or two that clients didn’t have as much confidence in their carry in their last fund,” Zimmerman added.
“People are realizing that some of these funds may not even return their capital at all,” said Category Ventures founder Villi Iltchev, who left Two Sigma’s venture arm to launch a $160 million first fund in December. “At a big firm, there can be very little to tie your work and your reward.”
Or as one leader of a large endowment put it: “The golden handcuffs are breaking. Financial loyalty at VC firms has never been weaker.”
The firms aren’t always loyal, either. The rise of mega-funds and multi-strategy firms that have seen firms like a16z, General Catalyst, NEA, Sequoia and Thrive Capital’s assets under management swell into the tens of billions had already created dynamics at those firms that look more like Wall Street and its private equity giants. “Some people thrive in large, CEO-led organizations, and some people are pirates,” said Conviction’s Vernal.
More recently, as a lack of IPOs and outsized acquisitions has limited how much cash firms and their backers are receiving back from their investments, some funds have felt pressure to raise smaller funds and pause later-stage investing programs. That has left some partners, particularly newer hires and those in less buzzy categories such as (non-AI) consumer investing or growth-stage deals, as the odd ones out in a firm’s plans. Increased focus on AI has also reoriented firms around their more technical-trained specialists.
So it’s no coincidence that a number of the emerging funds that have enjoyed relatively painless fundraising processes, including Conviction and Category, were built with an explicit focus on bringing deep tech knowledge to bear with AI and technical startups. Forbes profiled another such emerging manager, $150 million research-focused fund Laude Ventures, at its December launch.
“A small subset of firms have historically captured a lot of the returns, but if you don’t already have access to them, it can be hard to get in,” said Edwin Poston, cofounder of fund-of-funds TrueBridge Capital Partners (data partner to Forbes on the Midas and Next Billion Dollar Startups lists). “If you can get into the next potential Benchmark or Thrive, we can all do the math that the returns on a smaller, early-stage fund can be really compelling.”
That’s a good sign for specialist funds like Conviction and those that may seek to emulate it. Midas List veteran Mike Volpi, a retired partner at Index, recently hired investors for a new fund, Hanabi Capital, that will reportedly invest his personal capital and that of some friends. The availability of more, and more varied, sources of capital should give emerging funds a chance to prove themselves, he said. “When I got into the business, I would have never believed you could raise a $100 million or $200 million first-time fund,” said Volpi. “Whether this new generation of firms will be successful, the jury will be out for a while. The good ones are good at raising money, at least.”
At Conviction, Guo said that her smaller firm can keep winning promising AI investments while more traditional firms waffle on their approach to the fast-changing category. She hopes to add more partners to Conviction’s ranks over time, but she and Vernal are in no rush. “I don’t think you need a lot of people to be dangerous,” she said.
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