Venture Capital trends mimic Nash equilibrium

VC trends

(1) Late-stage investing is outpacing early-stage [1]
(2) Follow-on VC investment soars while first-time remains almost unchanged [2]
(3) Deal volume rises while deal number declines [1]


  • The agents here are VCs on the one side and entrepreneurs on the other
  • The actions of VCs are 1) funding startups 2) exit deals (M&A, IPOs) and entrepreneurs’ actions are 1) business decisions leading to a company growth 2) preparation for a quick & lucrative exit
  • It’s a non-zero-sum game because basically neither side wins at the expense of the other: when a startup grows VCs invested in it do not lose but celebrate, and vice versa, when a VC fund makes money entrepreneurs likely expect additional VC support rather than the end of relationships
  • It’s a repetitive game because of the continuous investing rounds and valuations
(4) One-shot prisoner’s dilemma [3]

How the trends support the hypothesis?

  • The incentive of VC here is to play the long-term game, because capital compounding requires time
  • Late-stage businesses have more chances to play the long-term game, especially in digital businesses where steadily growing customer base reinforces their competitive advantage due to the network effect
  • No one wants to be defected by the other
  • The actual duration of VC and entrepreneur relationship is unclear to both at the beginning




Consultant at Avanade;

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium


How Much Do Your VCs Care About You?

Collaboration and Human Experience-Innovation Today’s Society and Why it Matters

It’s my one year anniversary and I have one thing to share.

How this tiny startup is going to reduce the plastic waste of online shopping

Why I won’t stop building another startup?

History of Crowdfunding

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Kirill Tsyganov

Kirill Tsyganov

Consultant at Avanade;

More from Medium

For 99 % of founders searching for a VC investment is a waste of time. Here is why.

This is how a startup pitch looks like. A woman pitching her business plan to possible investors. In most cases this won’t work out.

Harshul Sanghi, Founder & Global Head of Amex Ventures — Reflecting on 10 Years of Investing

It’s Official! Untapped Ventures Launches Fund I in Style with Metaverse Party