I want to share our view of major changes to the VC landscape and how we have adapted our own VC strategy to these significant market changes.

At 7BC Venture Capital, we now employ a dual investment strategy, combining our traditional Venture Capital Funds with a Venture Capital Fund of Funds (FoF) approach.

Our approach is designed to capitalize on the evolving dynamics of the VC industry, where an explosion of new funds and a persistent liquidity crisis create unique opportunities for savvy investors. Simply put, Fund of Funds (FoF) + cherry pick with direct VC Funds investing in primaries and secondaries focused on buying preferred, not founder common shares, getting into the best direct deals from our FoF portfolio. We operate direct VC funds (7BC Venture Capital) separately from our Fund of Funds (7BC Capital).

The biggest changes we have seen in the VC industry are:

1) VC funds got bigger by 10x+. A $50m fund in the late 90's when I was first raising VC funding as a founder is now a $550m fund if they are still going. A $250m fund in the late 90's is now $3.5bn. The arrival of “crossover funds” that historically invest in publicly traded equities as mega hedge funds now buying into “stay private forever” privately held companies are driving up growth stage valuations and creating exit opportunities for early-stage VCs like us to begin to exit into these growth funding rounds and pay back LPs faster.

2) There are more VCs now than ever before and the smaller funds are outperforming larger funds by a huge margin. There were only 40 VC firms in NYC when I opened our office there in 2010. Now there's probably 1.2k active VCs in NYC alone. During the couple of decades I've lived in Silicon Valley, the number of VCs probably increased by 30x. What happened there? Every founder is becoming a VC. Something like 25% of founders are becoming VCs, not just the founders of Sun Microsystems, Netscape, PayPal, and Palantir. Even the lawyers, placement agents, M&A bankers, and my own LPs and unsuccessful VC-backed founders are all launching their own VC funds. This is not only happening in the SF Bay Area and NYC which used to cover 82% of all unicorns, but now also in Austin, Los Angeles, Boston, Chicago, Utah, Miami - literally everywhere. Parts of the country once considered to be dead zones have weekly VC meetups and, in a post-Covid world this seems to be working. This Cambrian explosion is possibly still in its infancy and it’s rapidly happening in every major metro area on every continent globally. We have never seen a fund of funds properly develop this high performing emerging manager market, with a true VC active mentoring value added GP support, leveraging a dual FoF + cherry pick strategy bringing the funds together to achieve synergies on all fronts while combining access to the OG emerging managers that outperform 90% of all VC funds investing out of disciplined smaller sub $150m fund sizes.

3) Mega funds are failing to achieve their ownership targets without buying secondaries from founders and the smart ones prefer to buy preferred shares from the smaller funds at the time of the growth rounds. This means the smaller earlier stage VCs can return LP capital faster than the growth investor who theoretically was investing closer to the exit. Selling a secondary properly as an emerging manager VC is not as simple and obvious as it may seem, but we have cracked the code on this with decades of experience as this market has radically changed both culturally and legally.

Our Dual Investment Strategy:

1. Fund of Funds (FoF): Through our FoF, we invest in top-tier, emerging manager VC funds, often at their final close and a smaller group of larger checks into OG emerging managers now with decades of track record and top performance while keeping fund size small enough to outperform Sand Hill Road. This allows us to enter at cost, benefiting from the positive Total Value to Paid-In Capital (TVPI) of funds that have already deployed capital into startups with follow-on funding at higher valuations. This is like buying a stock today at its price from two years ago. Our Global VC Demo Day event series and existing VC and founder-turned-VC network coupled with rigorous due diligence ensures we back the right funds at the right time. We also plan to eventually buy LP secondaries, where we purchase discounted LP positions in VC funds, often targeting trophy assets in their portfolios. The size of these transactions has historically been too small to attract the legacy LP secondary buyers whose minimum check size might be 5x to 25x larger than the entire emerging manager’s fund. The ocean of emerging managers will require end-of-life solutions to sell and wind up in just a few years from now and we expect to be ready with funds to service this expected demand. Most VC funds have a few LPs that are highly motivated to sell at a discount to just get out of a 12-year relationship presenting discounted opportunities.

2. Direct VC Investments: In parallel, we cherry-pick standout startups for direct investments, leveraging our FoF relationships to identify high-potential outliers. The FoF adds more deal flow to our already robust deal flow we have built up over three decades - our direct funds operate separately from our FoFs. Some LPs choose to be in either our direct funds only, our FoFs only, or in some cases both. For context, we are currently investing out of our fourth traditional direct VC fund. Our direct investments include: Primary investments, where our capital fuels startup growth when the startup issues stock and our investment goes into the treasury of the startup. Secondary transactions, where we acquire discounted preferred shares from VCs (typically at a lower share price to the last financing round), helping these VCs return capital to their LPs faster - critical for them to successfully raise their next VC fund from existing and new LPs. In a world with a growing number of VCs, this positions 7BC with unique access to both the front door (primaries) and the back door (secondaries) to get on the cap tables of the hardest to get into deals in the Valley and around the world.

3. Working with larger mega VC funds to grow their target ownership: If we see our shares go up by more than 10x when our portfolio companies are raising growth rounds at higher valuations and the new mega fund or crossover fund wants to own more of the startup, we see this as an opportunity to sell 10%, 25% or even more of our position to the larger VC funds. Often times, it is 7BC that introduces the startup to the Sand Hill Road VC we have known for decades and this is a great way to pay our LPs back faster while giving our LPs direct access to buy out 7BC partially and / or access the primary investing in the growth rounds of these winning startups with direct access and full financial information rather than buying shares in SpaceX or Databricks from multiple middlemen brokers without a full set of financial legal insider information. Our direct access benefits both the mega funds and our LPs that could never cover so many emerging managers’ portfolio companies.

This dual approach is designed to balance risk and reward, and is intended to provide our LPs steady distributions from our highly diversified FoFs and the potential for outsized returns from our comparatively concentrated direct VC investments.

Addressing the VC Liquidity Crisis

Many VCs today face a liquidity crunch: they report high TVPI (Total Value to Paid-In or unrealized paper returns) but low Distributed to Paid-In Capital (DPI), meaning little cash has been returned to LPs. At 7BC, we see this as an opportunity. By investing in the final close of emerging VC funds with strong TVPI, our FoFs capture unrealized value. Simultaneously, our direct VC arm partners with these VCs to buy 10-50% of their shares in top-performing startups at a discount, enabling them to distribute 1x their fund to LPs ahead of their next fundraising cycle.

This strategy accelerates DPI for our FoF LPs and positions 7BC as a near-exclusive buyer of smaller secondary transactions—a market segment underserved by larger players. We also advise and show our VCs how to sell into follow-on rounds or to other secondary buyers, further driving liquidity and distributions to our Fund of Funds. We help our VC portfolio of General Partners just as we coach and help our startup portfolio CEOs and founders.

Why Smaller Funds Outperform Larger Funds

The data is clear: smaller VC funds consistently outperform mega-funds. Large funds are forced to write big checks in growth rounds at valuations close to exit prices, compressing their return multiples. Smaller funds, in contrast, can invest early, achieve higher multiples, and now benefit from efficient secondary markets to return capital faster. The proliferation of new VC funds—over 1,000 in New York City alone, up from 50 a few years ago when we first expanded from Silicon Valley to NYC — creates a fertile hunting ground for 7BC to identify and back the best emerging managers across the USA and around the world. Our core focus is on VCs in every major technology hub in the US, starting with Silicon Valley, but we have met with scores of VCs in the UK, across Europe, Southeast Asia, the GCC, Africa, and LatAm. We have received over 1,000 applications from VCs seeking LP funding over the past 6 months and expect a deal flow pace of over 1,000 VC funds per year. The higher performance of smaller funds more than makes up for the small layer of fees of an FoF, not to mention the synergies with a direct investing VC fund. 

Global VC Demo Day: Our Deal Flow Engine

To source the best VCs while continuing to be an ecosystem builder, developing relationships and education with LPs, we host 11+ Global VC Demo Day events annually across cities including San Francisco, LA, Austin, New York, Miami, London, Dubai, and Singapore. These events are designed to:

Identify top-tier VC funds for our FoF while introducing VCs directly to suitable LPs – 7BC is actively swapping LP introductions with over 100 VCs.

• Develop relationships with existing and new LPs interested learning more about the venture capital asset class.

• Build relationships with startups for direct investment opportunities.

• Find the best VCs, family offices, corporate and other strategic allocators to make direct follow-on investments in our portfolio companies.

• Provide education and ecosystem building on a global basis enabling VCs, LPs, corporates, and startups to all do better faster and collapse expensive learning cycles.

VCs, LPs, startups, and supporters of the VC-startup-LP ecosystem are welcome to apply to join us at our upcoming in-person events:

www.7bc.vc

7BC Venture Capital organizes intimate dinners for 6 to 12 VCs in cities across the U.S., fostering meaningful relationships and facilitating deal flow. In addition to these gatherings, we host public events featuring insightful VC panels, presentations from our innovative portfolio companies, and networking receptions with a high concentration of VCs, VC-backed founders, big balance sheet buyers, and other key luminaries of our industry.

Apply to attend our upcoming events: https://lu.ma/user/usr-8Y0b18KjVLZhAPm

🍎 New York City – September 17, 2025 – Host: Brown Rudnick

🇺🇸 Washington DC – September 25, 2025 – Host: DLA Piper

🇨🇱 Austin – October 14, 2025 – Host: CBRE

🇺🇸 San Francisco – October 29, 2025 (Day after TechCrunch Disrupt) - Host: Greenberg Traurig 

☀️ Los Angeles / Santa Monica – November 5, 2025 – Host: ExpertDOJO 

🌴 Miami – December 4, 2025 (During Art Basel, Dec 3-7) 

🇦🇪 Dubai – February 2026 

🍎 New York City – April, 2026 – Host: Brown Rudnick

🇺🇸 San Francisco – April, 2026 - Host: Greenberg Traurig 

🇸🇬 Singapore – May, 2026 – Host: Greenberg Traurig 

🇩🇪 Berlin – June 11, 2026 – Day after SuperVenture

🇬🇧 London – June 16, 2026 – Host: Brown Rudnick

Join Us

The VC landscape is transforming, and at 7BC Venture Capital we want to share our insights into the significant changes we have witnessed during our decades of industry experience and how we see the VC – startup – LP industry evolving. Let’s share insights and build the next generation of VC funds, startups, and family wealth together in-person.

#VentureCapital #VC #Secondaries #StartupInvesting #FundofFunds #FoF #VCstrategy #Liquidity #7BC #DemoDay #LPs #GPs #EmergingManagers #DPI #TVPI

Disclaimer: Under no circumstances should any material in this blog post be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any individual company or investment fund managed by Andrew Romans, 7BC Venture Capital, 7BC Capital, or any other fund.

https://www.linkedin.com/in/romans/

https://www.7bc.vc/