The New Kings of Capital | Ep. 735
How Mega-Funds Are Reshaping Venture and Squeezing Out the Middle
Hello Avatar! Welcome to another week of biotech analysis. Today’s commentary is as always on Thursday focused on the general market update. For the week XBI was FLAT +0% and remains red at -2% for the year. This week, we dig into one of the most important shifts happening beneath the surface of venture capital -consolidation. Capital is increasingly flowing to a small group of mega-funds, leaving midsize managers squeezed and new entrants boxed out. While headlines focus on total dollars raised, the real story is who’s raising them, and what that means for innovation. From the power-law dynamics playing out across fundraising, to the growing resemblance between VC firms and institutional asset managers, this week’s newsletter explores how the venture model is being redefined in real time.
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Lots to cover this week, let's get started!
BIOTECH PUBLIC MARKET UPDATE
For the week, the public indexes were both FLAT, with the S&P +0% & DOW moving +0%. For the year both remain UP +7% and +4.5% respectively. The XBI (the biotech index) comes in FLAT +0% for the week and remains -2% for the year.
Macro Update
Sentiment Observation - When Retail Wakes Up and Why It Still Feels Dead
Retail still hasn’t shown up for biotech. They’re not YOLOing into $IMTX or flipping options on $REPL. Why? Because the only thing that pulls retail in is fast, visible money. When someone’s quitting their day job to day-trade small-cap gene editing names, that’s when you know we’re in a mania. We saw a taste of that post-election, but it faded fast. The average retail trader is still glued to NVIDIA, not checking FDA calendars or ODAC hearings.
Slower, Longer Pain = No Panic = No Capitulation
You don’t get big rallies when everyone’s scared, you get them when everyone’s bored and underweight.
Biotech is in that zone now.
The chart below says it all, the average duration of unemployment has quietly climbed back to 23 weeks, up from a low in February. That’s not recession-level panic, but it’s enough friction to slow down job churn and keep optionality on the shelf.
Retail can’t chase if they’re unsure about the paycheck, and higher-duration joblessness starts to eat into risk appetite. It’s a drag on rotations into higher-beta trades like biotech.
Powell's Problem: Rates Still Top of the World
Global central banks are blinking, but Powell’s holding firm. The U.S. still sits at 4.5% while the rest of the developed world cuts back toward 2-3%. That spread matters. It strengthens the dollar, compresses valuations, and makes U.S.-listed biotech less attractive to foreign acquirers and funds. Every day Powell waits is a day bridge rounds get more painful and M&A math gets tighter.
Biotech doesn’t need a full 100bps drop, but it needs something to break the deadlock.
Tariffs Aren’t the Problem…Yet
Trump’s 200% pharma tariff threat is noise for now. There’s a grace period, and the market knows it. No one's moving supply chains until the ink is dry, but the signaling matters. Tariffs create uncertainty around CDMO strategy, particularly for companies relying on Asia for biologics fill-finish.
For now, they haven’t touched inflation and haven’t affected drug pricing, so biotech is safe.
But if these stick and global retaliations start hitting CRO/CMO networks, we’ll be talking about margin pressure for companies running lean on SG&A.
Still a Bull Setup, Just Delayed
Put it together: 23-week average unemployment, global easing, and Powell boxed in. Most of biotech already priced this pain in last year. The P/E names got torched. The cash burners got diluted.
Yet XBI is still up ~25% since April and almost no one’s talking about it. That’s exactly what a stealth bull looks like.
The moment Powell blinks (even a little, or gets fired) fund flows chase duration, M&A gets more aggressive, and retail finally opens their brokerage app and wonders why $VRTX is already up 30%.
On to today’s market analysis….
Rethinking the Venture Model
Silicon Valley Bank’s H1 2025 State of the Markets report delivers a clear message, the venture capital landscape is being fundamentally reshaped.
While most headlines focus on total dollars raised or deployed, the more important story is who is raising and deploying that capital.
The industry is no longer just recovering from the post-ZIRP hangover, it is structurally consolidating.
SVB highlights how today’s venture model is increasingly concentrated in the hands of a few large firms. This is not a blip caused by macro conditions. Rather, it's the byproduct of a market where institutional LPs, spooked by recent volatility, are doubling down on “safe” names with brand recognition, deep reserves, and multi-stage platforms. In this environment, capital allocation is not just about opportunity, it’s about reputation and risk minimization.
Today we break down the rising dominance of mega-funds, the growing gap between the top decile and everyone else, the persistence of the same elite firms year after year, and the precarious future of mid-sized managers. Together, these dynamics paint a picture of an increasingly top-heavy venture ecosystem.
Concentration Nation: Big Funds Dominate the Landscape
Since 2020, the largest venture capital firms have dramatically expanded their share of total fundraising.
Funds larger than $500 million consistently capture between 35% and 45% of all venture dollars raised.
The steep rise in share post-2020 is especially striking, revealing how capital flight during the downturn disproportionately favored large, branded platforms.
In 2024 alone, the top 10 firms captured 22% of all venture fundraising. These firms have scaled into institutions, with resources to lead multiple deals per quarter, backstop their portfolio companies, and maintain in-house value-add teams that resemble private equity operators more than early-stage mentors.
What’s more concerning is the entrenchment. Unlike past cycles where emerging firms could rise to challenge incumbents, today’s environment sees little turnover at the top. When risk tolerance falls and LPs seek familiarity, the top stays the top. This further widens the moat around dominant players and raises the barrier to entry for newer or mid-tier firms.
Power Law in Practice: Fundraising by the Numbers
Between 2022 and 2024, the top 10% of venture firms raised $258 billion, nearly double the $148 billion raised by the bottom 90%.
The visual layout below is stark, a few large boxes on one side, and a crowded patchwork of smaller boxes on the other.
This level of concentration effectively reshapes how the game is played. Large managers can afford to swing at fewer but bigger pitches, writing $100M+ checks and participating across multiple stages. Smaller funds, meanwhile, must hustle to fill syndicates, negotiate scraps, or lean heavily into follow-on rounds just to stay relevant.
What’s less obvious, but equally important is how this capital imbalance compounds over time.
Larger funds aren’t just better capitalized; they also see better deal flow, attract better LP terms, and exert more influence over board decisions and valuations. The network effect in venture is real, and this kind of dominance risks ossifying the industry into a two-class system.
Same Faces, New Cycle: Who’s in the Club?
Despite market upheaval, the composition of top fundraisers has barely changed.
Most firms from the 2020–2021 leaderboard remain dominant in the 2023–2024 period. Names like NEA, Andreessen Horowitz, and General Catalyst have become permanent fixtures in the venture fundraising elite.
There are subtle shifts, Tiger Global has fallen, while firms like OrbiMed and Greenoaks Capital have entered the ranks. And while this analysis is often framed around tech, the implications extend into biotech. OrbiMed’s rise signals continued LP appetite for life sciences, but it also reinforces the broader trend: the largest firms are now multi-sector giants. They resemble asset managers more than early-stage partnerships, with specialized platforms, cross-sector thesis teams, and proprietary deal pipelines.
This concentration of power has downstream consequences across the innovation economy. It affects pricing, competition, and access to capital, not just in consumer tech, but also in therapeutics, tools, and diagnostics.
When the same firms lead every Series A or B round, they define who gets to scale, what business models get funded, and how risk is priced. For founders, that can offer stability. But for biotech, and science more broadly, it risks narrowing the funnel of ideas that receive serious backing.
The Squeeze on the Middle
While large funds and small specialist firms have adapted to the new normal, mid-sized funds are being squeezed from both ends. These managers aren’t large enough to lead $100M rounds or write $25M follow-ons, yet they also lack the differentiated thesis or deep networks that help smaller funds stand out. They’re caught in a no-man’s-land.
This is particularly troubling because mid-sized funds have historically been the proving grounds for emerging managers. Many of today’s brand-name GPs cut their teeth at $150M–$400M funds. But that path is narrowing. As LPs concentrate capital into a handful of large funds and niche specialists, mid-sized managers are being passed over in fundraising cycles or pushed to merge for survival.
The end result may be a venture ecosystem that becomes flatter and less competitive. Consolidation is likely, both among funds and portfolio companies. With fewer decision-makers writing larger checks, the market risks developing a monoculture, one where capital flows toward the same ideas, the same stages, and the same networks.
CONCLUSION
Today, we unpacked how the venture capital landscape is consolidating around a small group of dominant firms. You saw the numbers: mega-funds now command an outsized share of fundraising, mid-sized managers are getting squeezed, and the same names keep appearing at the top. This isn’t just a temporary response to volatility, it’s a structural shift, one that’s reshaping access to capital, deal dynamics, and the types of innovation that get funded. As venture firms evolve into institutional platforms, the consequences will ripple far beyond tech, touching every corner of the innovation economy, including biotech.
We are now publishing 7x per week according to the following cadence:
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We are watching the venture ecosystem drift toward a capital monoculture, where fund size dictates risk appetite, and only the loudest themes get funded.
Mid-sized funds were crucial for cultivating judgment, big enough to lead, small enough to experiment. Without that middle rung, the weird-but-worthwhile gets stranded, and the next generation of GPs is either boxed into micro-funds with no carry worth waiting for or buried inside mega-platforms executing someone else’s thesis.
Long-term, this setup flattens the innovation landscape and delays the handoff to new stewards of capital.