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Vivek Joshi

Director & CEO @ Exc... • 9h

Current Economic Headwinds for VC Funders The VC landscape in mid-2025 is grappling with significant economic shifts. After a boom, VC funders face a more disciplined environment due to higher interest rates, persistent inflation, and a recalibration of startup valuations. Inflation raises startup operational costs, eating into margins, especially for early-stage companies. It also erodes LPs' returns, increasing scrutiny on fund performance. Higher inflation often leads to valuation compression as discount rates rise. Elevated interest rates make debt financing pricier for startups. This also makes safer assets like bonds more appealing to LPs, diverting capital from riskier venture investments. This leads to reduced investor risk appetite. The valuation reset means many startups face "down" or "flat" rounds, impacting VC portfolio performance. Investors now demand stronger unit economics and clear paths to profitability, shifting away from hyper-growth at any cost.

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