VCM&A sounds like an amalgam fit for a holding company. Not this time. It’s my shorthand for Venture Capital Merger & Acquisition. What is going on in startup land? Two words: zombie apocalypse. This year, more than three thousand companies that raised $27.2 billion from VCs shuttered. More surprising, the funds that backed them are merging or closing.

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Where and when did this start? I’m going to say Rice University September 12, 1962. Did the specificity amaze and delight you? Great, I pulled the thesis out of my increasingly ample posterior. It was the day JFK put America on a mission to the Moon. He mentioned something it being hard; not easy.

His words made NASA the IT-thing. NASA attracted the top people. Big, new, exciting things always do. Space in 1960s. Media in the 1970s. Trading in the 80s. VC in the 90s. Tech in the aughts. Founder stuff since.

What happens to IT-things when the IT fades? The best and brightest ply their skills elsewhere. Some smart people stick around – sure. Some people still go there because it’s a passion. But, you lose the trendsetters, the moneymakers, and the people who want to build new things.

After staging the Moon landing, space traveled a road to nowhere for decades. The newspaper, magazine, radio, TV, and cable businesses built in the 70s are in decay. Bond trading isn’t the stuff of books or movies. Now we’re up to VCs.

VC started as a cottage industry. Eight guys didn’t like the jerk they built microchips for. So, they found someone to give them money to start their own company. Fairchild Semiconductors. Each of the eight got 10%. Arthur Rock got 20% for putting the deal together. The incidental 80%/20% split is core of venture fund economics.

The founders names are — now — synonymous with venture funds and venture-backed successes. Eugene Kleiner (of Kleiner Perkins), Gordon Moore (of Moore’s Law and co-founder of Intel), Robert Noyce (co-founder of Intel), and five other guys whose lineage includes a web of startups and venture funds that spawned: Apple, AMD, Intel, Kleiner Perkins, Sequoia Capital. In the decades since, they founded and funded AOL, Netscape, Amazon, Google, Uber, Tesla, Airbnb,… You get the idea.

How did we get here?

It’s 1972 and Don Valentine finishes his seventh year leading sales at Fairchild. He and Arthur Rock start Sequoia. That was the year Atari made Pong. By 1975, Sears agreed to distribute Pong IF Atari could manufacture two million units. Toys “R” Us declined to help. Radio Shack did too. Sequoia gave Atari $600,000 to bring Pong into living rooms. The money wasn’t to build software. Just make boxes that were presold with a known profit margin. The risk was nil. Through that investment, Valentine met a 19-year-old Steve Jobs. Sequoia invested $150,000 in Apple to make computers personal. Don played a key role in the day-to-day operations.

You see the hallmarks of good venture. Relationships were personal. Risks are modest. Deal size was small. Time spent was large. The returns were MASSIVE.

What is a venture deal?

Venture money is not for butcher shops, or bakeries, or stories that sell candles and other tchotchkes. It’s for companies that can sell at a meaningful price to someone else.

And, this is one problem. How many companies can reach that size? And want money from a VC? And, need money? Not nearly as many as you’d think.

There are 3700 public companies. If you take out the top 500 which is Apple to Boston Scientific, the average company is worth $2.2B. There are 1200 unicorns (private companies worth at least $1B). They’re valued at $5T. The average value of $4.2B. The best companies in a venture portfolio are already worth nearly twice as much as 87% of public companies. The math is impossible.

Let’s try easier math. Sequoia has 455 current investments. Forty are unicorns. They have had 19 unicorn exits – more than any other fund. Their exits include: Instagram, Snap, Square, tumblr, WhatsApp, and Zappos. If they best fund hasn’t exited a unicorn you’ve heard of in a long time, what are the chances that their 40 unicorns are going to sell?

One solution is to discount unicorns. A few months ago, Atlassian paid $975M for Loom. A few months earlier, venture funds valued Loom at $1.5B.

This is problem two. Even when you sell at $975M, the people who thought it was worth more lose money. Not make less; lose. So, investors are loathe to sell “cheap.” Mesosphere passed on a $150M offer from Microsoft. They shut down.

Three guys named Tobi, Florian, and Benjamin started Mesosphere in 2013. It’s a company that helps dev-ops. Dev-ops are the people who get the call at 3am to say the code at Airbnb stopped working. Over multiple rounds, they raised $247M. Their ten-year ride is over. There is no big payday. Not for them. Not for the VCs. Not for the 160 people who worked there and got stock options. It’s all gone.

What if they hadn’t taken VC money or they had taken much less? Just enough to pilot their first project? Could they have sold at a much lower price with fewer mouths to feed and made good money? The answer to that is usually, “Yes.”

Which is why more founders are thinking about building smaller businesses with less money that they control and they can sell at a price that suits them.

In 1972, Sequoia was one of a dozen funds and managed $3M. Today, Sequoia manages $85B including an $8B fund just for China. It raised $585M for crypto deals and $450M for eco-friendly deals. They gave half the money back. The even more headline-y version of this story is OpenView. OpenView raised $570M for their seventh fund in March. This week they shut it down and laid off all their people. OpenView could have taken 2% fees for a decade or so. But they realized there are better ways to spend their time and make money.

Venture types can’t invest the $271B they have right now. Not successfully. And, that’s why we’re seeing what we’re seeing. Venture funds merging. Venture funds shutting down. Because — like Tobi, Florian, and Benjamin — the people in VC are starting to realize there’s an opportunity cost to life.

The smart people who flocked to VCs are beginning to wonder what the new IT-thing is. They want to put rockets into space not travel a road to nowhere.