VC Investments - Risk vs Return

FERNANDA MACHADO
May 13
2 min read

The Risk Paradox: Why Has Series A Become a Desert?

In today’s early-stage venture capital landscape, many investors are behaving more like traditional allocators than explorers of asymmetry. Despite record levels of dry powder and a wave of accelerated innovation—particularly in AI—Series A rounds have become increasingly scarce.

The reason? A growing disconnect between the level of risk investors expect to take and the returns they’re actually willing to chase.

There is still significant return potential (MOIC) in early bets, but the bar has never been higher: a good product, PMF, and some traction are no longer enough. Since the launch of ChatGPT, clear differentiation and unique edge have become essential.

At its core, this dynamic is circular: investors want “de-risked” startups, but the very milestones that reduce risk—like PMF and early revenue—require capital that is no longer flowing.

It’s the classic Catch-22, now amplified by macroeconomic pressure.

Even AI startups or developer tools—segments that are hot in seed—are struggling to raise Series A.

Conceptual graph comparing risk and return across venture capital investment stages. It illustrates MOIC (multiple on invested capital) decreasing as risk decreases and time progresses, from Pre-Seed to Public Markets, with the “valley of death” highlighted at the early stage.

Data from Carta shows a sharp slowdown in the pace of these rounds, despite a robust seed pipeline. In practice, many VCs have adopted a growth-stage mindset even at early stages, demanding post-revenue clarity.

The result? Inflated valuations, prolonged fundraising timelines, a surge in bridge rounds, and premature M&As.

According to Sling Hub & Namari Capital, 86.4% of startups never make it to Series A, and over 95% never reach Series B.

The valley of death is real—and it’s getting wider and deeper.

With high interest rates and a narrow IPO window, today’s capital is prioritizing liquidity and predictability over asymmetric upside. Even in AI, only platforms with clear distribution advantages and strong GTM motion are managing to raise.

In this environment, capital efficiency is no longer a virtue—it’s a survival strategy.

And for the funds still willing to bet on speed, not just visibility, this might just be the vintage of the decade.