Ditching the Moonshots: Mapping the Anti‑Power Law Venture Landscape

Venture Capital is the process of a reckoning; these firms are ahead of the curve

Are you a real venture capital investor or VC- backed founder if you have't read Sebastian Mallaby's Power Law? Mallaby’s core message is deceptively simple: venture capital returns obey a power‑law curve in which a handful of breakout investments drive almost all the gains, so the entire industry is optimised for hunting moonshots and writing off the rest.

Image courtesy X (@scmallaby)

So, why is the venture world so obsessed with the power law? It all comes down to venture math. Two examples come to mind: boils down to the math. The first is one of the examples in Power Law. In 1996, Silicon Valley legend and Khosla partner Vinod Khosla wrote a US$3 million cheque to Juniper Networks, an internet router company. Just three years later, the company went public and Kleiner Perkin reaped US$7 billion from the IPO for a 1,400× return, one of the largest multiples on a VC investment till date. More recently, Google’s acquisition of cybersecurity startup Wiz for US$32 billion in March 2025 earned early backer Cyberstart a 200x return on its US$6.4million investment.

When the power law works, it damn works there is no question about that. The problem is, consistently finding those 1,400x or even 200x winners across multiple funds is incredibly rare. Very few VC firms manage to achieve this. As such, the median VC fund often struggles to deliver standout returns, frequently disappointing LPs compared to less risky investments.

Imagine if every bank offered credit cards with no spending caps to all comers, wouldn’t work, right? In reality, elite cards like the JP Morgan Reserve or Amex Centurion are by invitation and offered to only the ultra wealthy. Yet, it often feels like every single VC fund raises capital pursuing the same high-risk, capital-intensive, outlier-dependent strategy. Little surprise then, that the industry is currently stuck delivering mediocre returns in the past few years. Investors poured billions of dollars into software startups depending on hope as a strategy, instead what we have is thousands of zombies - stuck with no where to go.

Alternative Path to Achieving Venture-Style Returns

So, if banking everything on lottery-ticket odds doesn't reliably work for most funds, what's the alternative? It turns out, not everyone has to play the exact same game. Some investors focus less on hitting that single 200x grand slam and more on improving their 'batting average.' The idea is pretty simple: build a portfolio that generates more consistent, solid wins – think more companies returning 3x, 5x, or even 10x the initial investment, even if the astronomical outliers are less likely.

This might involve backing businesses with clearer paths to profitability or using different kinds of financing that don't demand hyper-growth at all costs. It's a different way to think about portfolio construction and risk, aiming for strong fund returns through a higher frequency of good outcomes, rather than solely relying on outliers.

While the Power Law chase dominates headlines, a growing number of firms and investors have deliberately chosen different routes. They're not just tweaking the model; they're often rethinking core assumptions about growth, funding structures, and even what 'success' looks like. Let’s take a look at how these companies operate

Introducing: the “Anti Power Law” Venture Market Map

Anti Power Law Venture Funding Market Map

Backing Modest Outcomes

Not every fund chases billion-dollar exits. This first strategy focuses on achieving solid, consistent wins – think companies returning 3x to 10x – often by backing sustainable, capital-efficient businesses. Firms playing here, like Calm Company Fund (early stage) or Level Equity (growth stage) listed in the image, prioritize building a portfolio with a higher "batting average." Instead of relying on a single grand slam, the goal is strong fund performance through multiple successful, albeit more modest, exits. This directly counters the Power Law's dependence on rare outliers.

The Rollup Play

Another non-traditional path involves "Rollups." This is a strategy often seen in private equity but adapted here: acquiring multiple smaller, often profitable companies within the same niche and combining them. The goal? Create a larger, more efficient entity that benefits from economies of scale and potentially commands a higher valuation multiple than the individual pieces could. Think of firms like Tiny Capital or SureSwift Capital, known for buying up internet or SaaS businesses. Instead of betting on one startup's breakthrough innovation (the Power Law way), the rollup strategy generates returns through operational improvements, smart integration, and market consolidation. It's an "Anti-Power Law" approach because value creation comes from M&A execution and managing a portfolio of acquired assets, not purely from organic hyper-growth of a single venture.

Finding Value in Distress

The third bucket involves "Distress" or "Special Situations" investing. This strategy dives into scenarios that traditional VCs often run from – startups struggling with slower-than-expected growth, facing cash crunches, or needing significant restructuring. Instead of cutting losses (a common Power Law tactic), these investors see opportunity. They might buy out existing shareholders at a discount, provide critical turnaround capital, or help restructure the business towards a more achievable goal, often profitability over scale. Firms operating in this space, like Resurge Partners or potentially specialists like Bain Capital Special Situations (as shown in the image under Growth), are essentially betting against the Power Law's binary outcome. They find value where the typical venture model gives up, aiming for solid returns by fixing problems and navigating complexity, rather than just riding a wave of hyper-growth.

Transiting from Hyper-growth to Profitability

Whether your startup is facing distress, or you as a founder are simply tired of the relentless pressure for hyper-growth and misalignment with traditional VCs, we can help.

Our focus is on partnering with companies ready to make the crucial transition from a growth-at-all-costs mindset to building a sustainable, profitable business. The path doesn't always have to lead to unicorn status; sometimes, building a strong, enduring, and profitable company is the most rewarding outcome of all. As the venture world continues to evolve, recognizing these alternative paths will be key for both founders and funders looking for a different way to win.

Get in touch for a free consultation

Stalled to Sold: Unlocking Liquidity in Under-Performing VC Portfolios

At the peak of ZIRP (zero interest rate period) in 2021, starting a VC fund was very popular and it was relatively easy for ex-founders, consultants etc to branch out and raise a first fund. Four years later and the situation could not be more different. Venture capital is going through an existential crisis as limited partners (LPs) retreat from further investments due to the lack of liquidity over the past few years.

To understand what the issue is for VCs and their LPs, let’s look at a hypothetical fund we will call Arise Fund, a 2018 vintage which is fully deployed as of December 2024. In its last LP report, Arise reported a net IRR of 8.4%, TVPI of 1.36x and DPI of 0.03x.

Out of the US$100 million fund, Arise has 80 million investable which it has fully deployed into 40 startups. Average first cheque is 1 million with half of the fund reserved for follow on funding.

If you’re an LP in this fund, the optics don’t look good at all. The General Partners have taken $12million in fees over the past 6 years and have managed to generate cash returns of $3 million.  When a manager like Arise returns to market to raise a successor fund, LPs will naturally be hesitant to commit to re-investing considering the performance of current fund. Unfortunately, the situation with Arise is in line with the average US-based VC fund according to Carta’s 2024 Q4 VC report. It is not an isolated case of bad performance.

So, it’s not surprising to see that LPs are instead ditching emerging managers to invest in more established VCs. In 2024, just 10 VC firms accounted for nearly half of all fundraising activity in the US, according to a 2025 outlook by UK asset management firm VenCap which invests in blue chip VCs globally. The lack of exits and liquidity to LPs is having a material impact on VC funds. Pitchbook’s Q1 2025 venture monitor shows that in 2024, ~600 US-based VC firms received commitments of $78 billion. This is down from a high of 1,700 firms receiving commitments of about $190 billion in 2022.

Given the current abysmal state of exits and financial performance of VC across board, what could be done to salvage the situation and ensure the asset class does not end up not being a giant cash bonfire? To figure out what options the GPs have, let’s look under the hood. What does the portfolio look like?

Fund Portfolio Analysis – Typical Power Law Distribution

Arise has invested ~80 million of investable funds into 40 portfolio companies over the past six years. The performance and status of its portfolio companies is just what you would expect from the average participant in a high-risk, high-reward endeavour that VC is. As at the last portfolio report in December 2024:

VC Portfolio Performance Breakdown

• Nearly half of the portfolio has failed while there’s been just a small exit which resulted in the meagre $3 million return to LPs

• 22.5% of the portfolio is currently struggling, some of these may still return some capital but it is not likely they will be able to stay afloat without some drastic improvement. These portfolio companies have not been able to raise follow-on rounds are hanging on by the skin of their teeth.

• Another 18% of the portfolio are trudging along just okay

• A combined 19% of the portfolio are doing okay to great and have been able to raise Series A and B rounds at some markup to their initial investment by Arise Fund. These two groups are responsible for the paper gains (TVPI) of the fund to date.

It’s the classic power law distribution, many have failed BUT there’s no assurance there will be a winner. Most venture capital funds aim to achieve a net return of 3.0x to investors over the life of their funds, typically 10 years. The accepted wisdom is that a very small fraction of portfolio companies, the outliers will be responsible for the entire results of the fund. For example, for a fund that invests an average of $2 million in each startup, a successful power law strategy is exiting just 1 of 40 companies at a 200x return. If this happens, it doesn’t matter what the situation is with the rest of the portfolio, the fund ends up being successful. The trouble is that achieving these power law outcomes are exceedingly rare, leading to the median VC fund not even returning 1.0x.

“Over 50% of funds raised between 2000 and 2014 had not returned 1x capital after 10 years” - David Clark, Vencap International CIO on 20VC with Harry Stebbings

Why is VC Performance so Poor Across Board?

One word – exits! Or rather lack of it.

VC Liquidity from 2014 to 2024

Net VC cash flow (funds returned to LPs minus funds raised from LPs) was positive between 2014 up till 2017 and has been negative since then except for 2020 when it was positive. This means LPs are cumulatively very deep in the red in the past five years.

One of the biggest challenges with running a venture fund is that the feedback loops are notoriously long. It takes 10 – 15 years to know if an investment decision is the right call, leading to outsized fund returns or the wrong one, leading to failure. Also, investing at the intersection of innovative technology and finance means VCs are susceptible to wild swings in both fields.

VCs today are dealing with the effect of steadily rising valuations in the decade from 2013, fuelled by low interest rates and intense competition between VCs. This reached a peak in 2021. Comparing Pitchbook-NVCA data over the period, median US seed pre money valuation increased 3x from $4 million in 2013 to about $12 million in 2023, while the median early-stage valuation (Series A + B) climbed 1.7x from about $22.9 million to $39.6 million over the same period.

VC Exit Activity

Though exit activity in 2024 reflected a modest increase from 2023, the 1,260 deals announced were just over 60% of the 2021 figure. Exit volumes of $158 billion was less than 20% of the 2021 high.

Currently, a cycle of doom seems to be in effect: startups cannot exit because of inflated valuations and macro‑economic uncertainty; the lack of exits hampers VCs’ ability to raise new funds, which leaves more startups under‑funded and prone to failure, further hurting VC performance and depressing exits even more.

What Can the Venture Capital Firms Do to Drive Exits?

VC View on Exits: Must Be Nurtured

Considering majority of acquisitions happen at early stages pre-Series B, it is not practical for startups to have in-house expertise such as an experienced CFO or investment banker to lead exit preparation.

VCs on the other hand have historically focused on the early part of the investing equation, picking “great companies” and then letting them be. This is starting to change as many VCs now realise that VCs are doomed without an industry-wide focus on exits and delivering liquidity to LPs. The problem is that apart from multi‑billion‑dollar giants such as a16z, Benchmark, Sequoia, Atomico and the likes, most VCs lack the in‑house resources to help portfolio companies prepare for and execute meaningful exits.

“In the last few months getting to an exit has been as hard as trying to raise funds.” – UK-based Corporate Venture Capital Investor.

Supporting portfolio companies is challenging because each startup’s circumstances differ and therefore require different interventions. The framework below simplifies the task by treating all companies as being at the same point, just before Series A, and by grouping them into two categories: “high‑fliers” and “strugglers”. In practice, a fund will hold startups at several stages.

23mile VC Portfolio Exit Framework

How would Arise Fund apply this framework to its portfolio? A structured approach would be

1.    Triage: classify the 24 surviving companies as either high-performers or strugglers. Another way to do this apart from the metrics approach in the framework is to classify by a) able to raise next round easily OR is cash flow positive b) all others

2.    Identify priorities: the needs of each group are vastly different. The top group needs a methodical, medium to long term M&A readiness approach. This ensures they are always well placed to achieve a great exit while they continue to scale the business. The “struggling” group needs more urgent attention – they need to stay alive and possibly sell for some sort of return.

3.    Allocate resources: should Arise buy or build the capabilities required to support exit needs of the portfolio? With a US$100 million fund, building a full M&A / corporate finance desk in-house is uneconomic, so Arise would most likely need to work with an external partner.

4.    Create and execute tailored action plans: High-flyers need to run a dual-track timetable. Keeping growth financing open while preparing for strategic sale. This plan requires targeted relationship building with corporate development teams, bankers and private equity funds. Strugglers need a decisive path: bridge financing, extensive cost cuts and/or bridge-to-fix and / or expedited sale.

5.    Quarterly review: the least disruptive approach is to integrate exit readiness KPIs into existing investor updates – at least for the top category. The strugglers may need a weekly / monthly update depending on how critical their runway situation is.

Unlocking Value from Struggling Portfolio Companies

VCs spend 80% of their time on “the losers". They should spend much more time on handful of winners instead. - Peter Thiel

Venture capital is and always will be about finding big wins. In a fund like Arise, seeking to improve its metrics in tail end of fund life, this will still be the case. As such, it will prioritise efforts on the handful of startups with potential to 10x or 100x their original investment. Let’s say they’ve identified four companies with this potential. What about the millions of dollars trapped in the other twenty? Write them off and leave them to die?

This is where 23mile steps in. We partner with VC funds to help portfolio companies transit from VC hyper-growth to profitability. This ensures good companies that are no longer “venture scale” stay alive and return some capital to investors. Our edge? A unique combination of fresh capital, restructuring support and medium-term exit support.

Get in touch to claim a free portfolio review.

Beyond the Power Law: Why VCs Need to Prioritise Exits - Introducing 23mile

Sometime last week, a friend asked me what the strategy is to grow the new business I was talking about and without thinking twice, I said it was "people". That mindset wasn't enough to prepare me for what happened over the past 24 hours. By sheer luck, I am making this announcement a day after my very April Fool's joke about selling Caena went viral. Although some of my contacts were pissed, the majority took it in their stride. The overwhelming sentiment can be summarised by this comment from Carol Constant

look at the all comments here and on WhatsApp: Everyone believed you made this sale. Why? Because it’s totally feasible. What a boost of confidence! Everyone believes in you. Congratulations 🙌 Now to finish the deed💲.

It's the perfect start I could only dream of as I embark on the next phase of my journey by cofounding 23mile Capital. 23mile is a turnaround fund for venture backed startups who need capital and support to transit from hyper-growth to profitability. It is built upon my diverse experience over the past 21 years as a leverage finance banker, tech startup founder, and consultant to PE and VC firms.

Yet, this launch is coming over 18 months after I started talking about exits, zombie startups and the need for a change in the typical power law focus of venture capital. Concentrating efforts on a few standout investments and allowing the rest to wither and die off.

I’ve written several articles about some of the emerging themes in venture:

• Zombies – startups which raised tons of venture capital but now are stuck. Their metrics are far short of what is now expected of startups at their stage, meaning they are unlikely to ever raise another round.

• Lack of exits: the IPO and M&A markets are way down from previous years. A downstream effect of startups having raised at inflated valuations and at onerous terms.

• Ghost VCs – Funds which ‘YOLOed’ LP funds into startups at inflated valuations between 2019 and 2021 and now can’t raise future Funds because they haven’t made any distributions.

But I had doubts which I considered very valid reasons to play things safe. The two biggest where:

1. Who am I to pursue an innovative approach in a very closed, hard-to-crack industry?

2. Why would I take on so much risk while still smarting from my experience with the startup?

“A ship in harbour is safe, but that is not what ships are built for" - John A. Shedd”

But one thought overrode the doubts – if it ends up in a few years that I was right about the direction the venture industry is headed, would I be happy at my role today? Basically identifying the issues and waiting for others to do what needs to be done.

No! I wouldn’t be happy at all

So here’s me jumping right into it. There are solutions to the current challenges facing VC-backed companies and their investors and I’m putting my hand up to be at the forefront of delivering those solutions.

23mile is unique because it is a blend of M&A advisory, capital and restructuring support for startups. We will also pursue a true partnership, creating outcomes that ensures all parties - LPs, VCs, Founders and our investors - can win or at least achieve better results than without our involvement.

For full transparency, I will continue to work on Caena, though the bulk of my efforts will be geared towards growing 23mile. I am still passionate about financial literacy for entrepreneurs and I am lucky enough to have a few enterprise partnerships to continue to pursue that mission. The tech platform will evolve towards achieving some sort of exit that at least returns capital that went into building it out.

In short, the April Fool's joke wasn't some random thought, it's the type of outcome I've been thinking about non stop for the past few months. For Caena and for the clients we are working with at 23miles. I can't wait to put the template to use in announcing exits for our clients over the next few months.

See our announcement here for more details

It promises to be an exciting journey, if you'd like to get involved in any way, please get in touch. Also feel free to shoot any questions, I still have a lot myself but will try my best to answer.

Cheers to new beginnings!

And in what I see as another perfect alignment, I started 23mile on the first day of Spring. Seeing cherries bloom last week further warmed my heart so I'll end with with this beautiful image.

Battersea Park, London

and this:

"No winter lasts forever; no spring skips its turn." — Hal Borland

Zombie Startups: Breaking Free from the VC Hypergrowth Trap

For Venture-Backed Startups, Slowing Growth Should Not Mean Shutting Down

Just 12 months ago, Susan was on top of the world and it felt like nothing could go wrong. She and her HapMedAI team were celebrating the fast-growing healthtech startup’s successful closing of a $15 million Series A round. Although the food and atmosphere in the swanky New York restaurant were top notch, she found it hard to be present as she was already thinking about expanding the team, growing revenue and a Series B within 12 - 24 months.

Fast forward to today and everything that could go wrong had definitely gone wrong. The changing macroeconomic conditions, especially rising interest rates, had severely impacted HapMedAI and its customers. At the time of the Series A raise, their financial model projected annual recurring revenue (ARR) to grow from $1.2 million in 2023 to $3 million in 2024. Heading into the last month of the year, the team were hustling to close the last few loose ends that if achieved would get revenue to $1.7 million, a far cry from investor expectations.

Zombie Startup Financial Dashboard

Over the past 12 months, Susan has noticed a palpable shift in attitude from her investors. In the weeks leading up to the Series A and for the first few months thereafter, she always received instant responses to text messages and emails from every single one of her investors. However, slowly and steadily, each of her investors had retreated till the best of them would respond to messages two weeks at the earliest. What Susan didn’t know is that her investors had silently written her off as a Zombie startup. A humiliating classification for any startup with high ambitions and one which is potentially a death sentence.

Why Do VCs Give Up on Zombie Startups?

Two words: “Power Law,” an adaptation of the Pareto Principle which guides most venture capital investments. Returns in the most successful funds have been found to follow a power law distribution rather than a normal distribution.

VC Power Law Returns Distribution Vs. Normal Distribution

VCs invest under the assumption that one super successful startup in a portfolio of say twenty, will return more to a fund than all others combined. As such, they seek to optimise returns from those most likely to be outliers or ‘fund returners’ - achieving upwards of 50x initial investment. It’s the main reason why VCs reject so many startups who think they are good businesses but the VCs don’t believe they can scale exponentially enough to return their fund - a.k.a. venture scale.

The problem is that this theoretical returns distribution holds true in reality for only a small percentage of VC funds. In reality, 75% of VC funds don’t return up to 2.5x investment returns (meaning LPs are better off investing in S&P 500) and the bottom 25% don’t even return 1.0x  invested capital. This is because it is incredibly rare to pick the 50x outliers that are essential to a successful power law strategy. This is according to research by Cambridge Associates, which concludes that even the top VCs have a 2.5% chance of picking these outliers.

Holding onto the Power Law as a default strategy is like expecting all startups to pursue a go-to-market strategy like OpenAI did with their 10bn war chest and achieve the same 100 million users in 3 months' trajectory. As unfeasible as the OpenAI trajectory is for the average startup founder in Lagos, London or even Los Angeles, so it is for the average VC pursuing a Power Law approach. Unfortunately, there’s little evidence of many VCs bucking the all-or-nothing strategy. The two notable exceptions are Indie VC led by Bryce Roberts and Calm Fund by Tyler Tringas. Both funds focus on "one and done" approach, backing startups which intend to raise just one round to get them to profitability.

Chances are HapMedAI has a cap table filled entirely with angels and traditional VCs pursuing the more common all-or-nothing approach. So it’s understandable that the VCs are either unwilling or unable to provide ongoing support to help the team weather the storm.

VC- Backed Startup Shutdowns: Outcome of Lack of Support?

3,200 venture-backed U.S. startups went out of business in 2023 according to the New York Times. These startups collectively raised over $27 billion in venture funding before packing up. By all indications, 2024 will be as bad. Data from Carta indicates that as at 1Q 2024, there was a 58% year on year increase in startup shutdowns. These failures are a direct consequence of the boom or bust approach that pursuing venture scale necessitates. It’s understandable when startups that have no real value or customers shutdown, what’s appalling is startups that have potential to exist as stable, sustainable business shutting down because they are no longer venture scale candidates.

The implications of these shutdowns are multifaceted, with by far the largest impact being that to employees and investors. The startup layoff tracking site Layoffs.fyi reports 526 tech companies with almost 150,000 employees laid off in 2024 alone. The good news is that 2024 is on pace to be a better year than 2023 when almost 1,200 tech companies combined to lay off over 250,000 employees.

Startup Shutdowns and Layoffs Accelerate

There are many reasons why the default solution to slowing growth and attendant inability to raise further funding is a complete shutdown. Each startup shutdown is unique but some of the common factors include: 

• Investor expectations: they signed up for >10x returns and would consider it not worth their while to commit time and money into rescuing invested funds

• Founder motivations: many founders would rather go take another shot at a big win than try to rescue one that is obvious won’t become a unicorn

• Existing structure: switching from a fast-growth mentality to a more sustainable, profit-minded startup isn’t exactly easy

That’s why the rare step by Pitch, a Berlin based startup to return investor capital and “get off the treadmill” is commendable. Founded in 2018 by well credentialed serial entrepreneurs, Berlin-based Pitch raised a total of $130 million dollars in funding by late 2024. In January 2024, citing the unrealistic, “hyper-growth company expectations”, Pitch decided to abandon the venture path and switch to bootstrapping instead. This involved laying off 2/3rds of employees including the founder/CEO, returning bulk of unspent funding to investors, focus on attaining profitability and “resetting” the cap table such that founders and current employees would own 80% of the company going forward. It remains to be seen how this remarkable and brave move plays out.

What are the Alternatives to Venture Hypergrowth and Creation of Zombie Startups?

Although the default unicorn-hunting venture capital model of backing a few hypergrowth, high risk startups isn’t going anywhere, it’s obvious this model works only for a very few. Currently, too many founders and VCs fail disastrously while pursuing this strategy. There is a need for an alternative model that compliments this approach and works better for LPs, GPs, founders, employees and other stakeholders.

For instance, the failure rate of VCs could be mitigated by pursuing a more sustainable portfolio optimisation approach rather than concentrated bets in a few startups. What if investors pursued a more sustainable and balanced approach instead of the traditional Power Law approach? 

The two strategies in the image above result in the same targeted returns profile of 3.2x. The success of the Power Law strategy on the left depends on finding that one outlier that delivers all of the results of the fund, the fund leaves a long tail of destruction (zombie startups) in it’s wake. A normally distributed strategy on the other hand achieves success by limiting risk across the portfolio, potentially reducing complete failures from 55% to 25% and spreading success across the rest of the portfolio. 

The change of strategy from a venture path to another option can either be initiated by VCs or management team. In either case, it requires both parties to be in sync as to what the best option is for the company and its stakeholders. For Pitch, which we discussed earlier, it was a return of capital and switch to bootstrapping. We’ve seen other zombie startups choose other options such as a merger, sale to a bigger company or even to continue on the venture path. The factors to be considered are many but some of the most important are:

• Revenue: is revenue at a decent level for funds raised and stage of business? Is revenue growing at least 2.0x year-on-year up to Series B? 

• Profitability: is there a path to cash flow profitability? Are unit economics positive?

• Team: is the founding team still energised to continue to execute for many years till exit? Are existing investors and other stakeholders fully supportive?

The VC-Backed Startup Health Check above represents the key decision points that companies like HapMedAI face when evaluating their path forward. While the framework is clear, making these assessments objectively and implementing the resulting decisions requires specialised expertise - expertise that most startups and VCs don't have in-house. 

If your startup is at a crossroads similar to Susan and HapMedAI, the first critical step is to avoid the mistake that sinks many promising startups - denial. Confronting challenges early and honestly with your management team dramatically increases your chances of finding a viable path forward. We're offering a limited number of free initial health check assessments for Series A+ startups to help teams evaluate their options objectively. Get in touch to learn if your company qualifies.

23mile Facilitates $25 million acquisition of investment tech startup

FOR IMMEDIATE RELEASE

Leading US Bank Acquires Financial Modelling & Fundraising Platform for $25 million

New York, NY – April 1, 2025 – One of the largest listed banks in the United States announced today the acquisition of Caena, a pioneering fintech platform that simplifies fundraising for startups and small businesses. This strategic acquisition strengthens the bank's commitment to innovating venture financing and enhancing access to capital.

Caena.io has emerged as a leader by automating complex fundraising processes, offering tools for financial modeling, investor matching, and streamlined investor relations. With an existing network of over 8,000 startups primarily in the UK, Middle East, and Africa, Caena.io facilitates efficient connections between early-stage businesses and venture investors.

This fits into the bank’s existing Investor Connect. A digital platform designed to streamline the fundraising process by connecting startup founders with venture capital investors. The platform offers features such as facilitating investor introductions, creating virtual data rooms, and enabling secondary market trading of company shares

This acquisition follows the bank's earlier purchase of Aumni, a prominent data analytics provider serving startup investors. Both acquisitions underscore the bank's dedication to leveraging artificial intelligence and cutting-edge technology to support the growing entrepreneurial ecosystem.

Kayode Odeleye, founder and CEO of Caena.io, commented, "Joining such a prestigious financial institution marks an exciting chapter for Caena.io. Together, we'll amplify our mission to democratise access to capital and significantly enhance financial literacy among entrepreneurs globally."

The US$25 million consideration will be paid in a mix of cash and stock, subject to customary closing conditions and regulatory approvals.

* Further details on the identity of the acquiring bank will be provided later today once the market opens

About Caena.io Caena.io is a fintech platform that simplifies fundraising and investment management for startups, small businesses, and investment firms. Established in 2021, Caena.io streamlines deal sourcing, evaluation, and portfolio management through innovative digital solutions.

About 23mile 23mile is a turnaround fund for venture backed startups who need capital and support to transit from hypergrowth to profitability What makes us unique is the combination of capital, restructuring support and M&A advisory we offer. We also create a true partnership where we build long-term success for all stakeholders - founders, investors and employees.

Media Contact: Rachel Gorman
Head of Communications
info@23mile.com
+44 20 7946 0123

Announcing 23mile Capital – Restructuring Support and Capital for Venture-Backed Startups

The venture landscape is shifting and we’re here to help investors and founders with the transition

Is venture capital as we know it dying?

Venture-backed startups and their investors are facing significant challenges in the past three years that call into question the entire future of the asset class:

• Graduation from Seed to Series A at an all-time low: according to research by Carta, only 24.6% of US startups that raised a Seed round in Q4 2021 have raised Series A, 3 years later. This is down from an average of 46% for those that raised in 2017.

• Startup closures at all-time high: the number of startup shutdowns on Carta hit a new high in Q1 2024, with 254 company closures—a 58% increase compared to 2023.

• Unicorns are stuck in “no-man’s land”: as of December 2024, there are over 1,200 unicorns globally.  61% of the US-based unicorns have not raised another round since 2021.

The situation is not any better with the VCs.

• Venture capital lags the S&P 500: since 2021, the US stock market benchmark has returned 28% returns year on year. VC? -25% according to Hamilton Lane’s private markets report.

• Distributions back to LPs are also at an all-time low: according to Carta’s “VC Fund Performance 2024”, funds from the 2017 vintage, just 14.3% of funds have a DPI greater than 1x. Similarly, a report by Redpoint Ventures show that only 20% of Funds from the 2020 vintage have made any distributions after 4 years. At the same time after closing, the 2017 vintage had almost double, 37% with distributions greater than zero.

• IPO market “shut”: there were 17 tech IPOs in 2022, 2023 and 2024. In 2021 alone, there were 126! Before the Covid-driven boom, there were an average of 35 tech IPOs per year between 2016 and 2019.

What are the Causes of the Founder and Investor Downturn?

Why are so many startups shutting down?

Why can’t large, scaled startups successfully IPO?

Why are investor returns so consistently disappointing?

All massive market shifts happen for a confluence of factors and this is no difference. The biggest factor creating existential threats to venture landscape is rising rates. In the past two years, the fed rates have risen to almost 5%, a 17-year high.

There is reduced LP interest in investing with GPs when risk free rates are decently high. HNIs and institutions would rather place funds in secure bills or public markets than illiquid VC funds. Especially when these VCs don’t have performance that matches the risk profile.

The high-risk, high-reward power law approach to venture investing works when it works. But the lower capital availability, following a period of exuberance is having a marked impact on VC-backed startups across funding stages.

Early-stage startups that have raised seed to series A funding to purse venture scale growth are facing challenges as the requirements to raise further rounds has changed dramatically. Compounding matters is ongoing disruption from generative AI adoption.

At the later stage, startups that raised millions of dollars in funding are stuck in zombie land as they don’t have the metrics to either IPO or be acquired. In many cases, funding terms such as liquidity preferences mean founders and early investors will receive nothing in the event of an exit at prevailing market terms.

What’s come Next for Venture Capital?

“Insanity is doing the same thing over and over again and expecting different results” – Albert Einstein

For an industry associated with innovation, it’s ironic that many VCs are so resistant to change. But change the industry must if it wants to remain relevant. What would need to be true for founders, investors, LPs and other stakeholders to be genuinely happy with the state of venture capital? One thing: exits! Exits mean:

• Wealth creation for founders and early investors. These funds become available to be invested as angel investments creating new startups.

• Returns to VCs and LPs. Healthier DPI means LPs have the incentives and ability to invest in existing and emerging fund managers.

• Society wins from more jobs and reduced inequality.

For venture capital to remain relevant to innovative founders, the industry needs to return to its roots. Early VCs were real partners in growing their portfolio companies and it is only in recent years that it evolved into a spray-and-pray approach.

 In Comes 23mile

We are excited to announce the launch of 23mile. 23 mile offers venture-backed startups capital and restructuring support to help them transition from hyper-growth mode to a more sustainable approach.

Mission statement: empower ambitious founders to overcome challenges and create great outcomes for all stakeholders in the long run

What makes us unique is the combination of capital, restructuring support and M&A advisory we offer. We also create a true partnership where we build long-term success for all stakeholders - founders, investors and employees

23mile takes its name from the stage in a marathon where the worst is over but there's still work to do to get to the finish line. That's what we exist to do - to get founders through the toughest patch of their founder journey.

For venture-backed founders seeking to take their destinies into their hands, we’re here for you.

For venture capital funds who need help orchestrating exits for portfolio companies, we’d be happy to help.

Our team of founders, investors, bankers and potential acquirers are ready to roll up their sleeves and work with you to get startups back on the path that frees founders from the cycle of endless fundraising and impossible targets.

If you’d otherwise like to be part of our mission, we’re all ears as well.