Watch out for zombies. That’s the message from some enterprise capital executives who predict that AI will drive down the fee and time startup founders must construct companies—but additionally enhance the variety of ”zombies.” These are VCs companies who discover little demand for his or her companies, and are left to wander the tech panorama with out recent capital or new investments.
On account of AI, founders will change into so environment friendly constructing firms that they’ll not want to lift a number of rounds of capital, says Sam Tidswell-Norrish, who, in December, left personal fairness agency Motive Companions, and has since launched skilled neighborhood platform OPUS.
Tidswell-Norrish predicts that, over the subsequent 5 years, founders will possible acquire sufficient capital in a single spherical after which obtain profitability. This implies VCs will find yourself competing with one another for fewer allocations and should go downstream to search out firms, he mentioned.
Ben Savage, a accomplice at Clocktower Ventures, doesn’t agree. Savage thinks AI will possible spur extra concepts that trigger founders to create extra startups and presumably reinvent extra segments of the financial system. Matt Harris, a accomplice with Bain Capital Ventures, pointed to the cloud computing and SaaS growth of the final decade, which some thought would harm VCs. Harris thinks the present AI revolution may result in extra VC allocations.
For enterprise capitalists, AI may threaten their place or present a possibility, mentioned OPUS’s Tidswell-Norrish. Many companies raised capital, and had been investing, through the bull market of 2021 when startup valuations had been at a excessive. Enterprise funds typically take years to promote their stakes, so companies may construct their profile and lift a number of funds earlier than having to return capital, he mentioned. The enterprise trade is presently in a downturn with solely the highest tier and differentiated funds persevering with to lift cash, he mentioned. There are already quite a lot of VC companies that aren’t investing additional and simply operating “their existing fund lifespans down passively,” Tidswell-Norrish mentioned.
OPUS’s Tidswell-Norrish thinks AI will create an influence shift in favor of the founders, who will want much less capital. He expects many VC companies will consolidate or simply collapse over the subsequent decade. As a result of the companies have funds with a 10-year life cycle, many will “take a long time to die,” he mentioned.
Zombies are multiplying
The variety of U.S. zombie enterprise companies has elevated. At the start of 2025, there have been 574 U.S. zombies, or companies which have raised a fund within the prior six years however haven’t any identified investments since late December 2023, in response to knowledge from analysis agency PitchBook. This compares to the top of 2021 when there have been 382 U.S. zombies that had raised a fund since 2016 however had no identified investments for the reason that finish of 2020.
Most of the VCs who spoke to Fortune agree there shall be a hunting down of the enterprise capital sector but it surely’s not essentially due to AI. The IPO market has been shut for almost 4 years whereas mergers have crawled, making it arduous for enterprise funds to promote their offers.
Funds that began in 2020, invested in 2021— a file time interval for offers when firms had been promoting for top multiples—and nonetheless don’t have liquidity in 2025, can have a tough time elevating a second pool in 2026 and 2027, mentioned Peter Walker, head of insights at fairness administration platform Carta. “A lot of funds don’t have great performance metrics right now. If your last fund didn’t do very well, it’s a much tougher climate to raise new funds,” he mentioned.
Clocktower’s Savage mentioned there are all the time “over performing and underperforming” enterprise companies but it surely’s nonetheless too early to find out the influence of 2021 investing on fund efficiency. “There’s a lot of different forces at play in the capital formation of venture capital firms,” Savage mentioned.
Corporations that survive shall be VCs with a “differentiated means to create value,” mentioned OPUS’s Tidswell-Norrish. That is greater than the standard VC technique of simply offering capital however providing distinctive methods, or experience or networks {that a} founder can use to spice up their startup’s development or probability for achievement. “Ninety percent of VCs do not have real capability beyond their team supporting,” he mentioned.
The shortage of distribution is one cause why Tidswell-Norrish launched OPUS, which goals to supply networking connections for early-stage entrepreneurs and founders. In 2026, OPUS is anticipated to start advertising and marketing for its first fund, which is focusing on $20 million to $40 million, an individual conversant in the scenario mentioned.
“It’s a huge existential shift. We will see a reckoning,” Tidswell-Norrish added.
This story was initially featured on Fortune.com
