At TechCrunch Disrupt 2025, Sequoia Capital’s managing partner Roelof Botha offered a pointed and thought-provoking critique of how the venture capital ecosystem is commonly perceived and funded. Speaking on the main stage during a widely attended session, Botha argued that the venture capital industry should not be viewed as a conventional ‘asset class’ in the same way that equities, bonds, or real estate typically are. In his view, the simplistic notion that pouring progressively larger sums of capital into Silicon Valley will automatically generate a proportional increase in outstanding companies is deeply flawed. He cautioned investors and fund allocators against assuming that scale of investment equates to scale of innovation or success.
Botha elaborated on this argument with a wry observation, stating that within the framework of financial theory, investing in venture capital is effectively ‘a return-free risk.’ His remark drew upon the capital asset pricing model—a foundational theory in modern finance that relates risk and return—to emphasize a paradox familiar to anyone versed in asset valuation. In essence, he suggested that the joke lies in the fact that venture capital’s performance characteristics cannot be rationally explained through traditional risk–return correlations. Historically, he noted, venture capital has demonstrated patterns of behavior that are largely uncorrelated with those of mainstream asset classes, meaning its fluctuations do not systematically track broader market movements. This independence, however, does not necessarily make it an asset class deserving of arbitrary portfolio allocation.
He went on to explain that many institutional investors and portfolio managers—often called allocators—have long believed that the best practice is to dedicate a fixed fraction of their overall investments to venture capital on the assumption that diversification benefits would follow. Yet, Botha emphasized that this academic logic ignores the limited number of truly transformative startups capable of delivering extraordinary outcomes. In his words, “there are only so many companies that matter.” Channeling more money into the sector, he contended, does not create more of these standout enterprises; instead, it risks diluting the quality of opportunities. By oversaturating the market with capital, investors make it increasingly difficult for the most exceptional, rare, and innovative ventures to find the focus and resources necessary to thrive. In other words, abundant funding can sometimes crowd the soil in which breakthrough ideas need space to grow.
Expanding on his point, Botha revealed an illustrative statistic: there are now roughly 3,000 venture capital firms operating in the United States—a dramatic increase from around 1,000 two decades earlier when he first joined Sequoia. This tripling of firms represents not just industry growth, but a transformation in the competitive and cultural dynamics of venture investing itself. The proliferation of funds, he suggested, has intensified the pursuit of deals while potentially lowering the average caliber of investment discipline.
Reflecting on his early years in the field, Botha painted a vivid picture of how fundamentally the technological landscape has evolved since 2003. When he joined Sequoia, mobile devices were still a rarity, the concept of cloud computing had yet to emerge into mainstream awareness, and global internet access was limited to roughly 300 million individuals—a small fraction of today’s digitally connected population. The sheer difference in technological scale and accessibility underscores how dramatically the opportunity set for entrepreneurs has expanded over the past two decades.
Yet, despite these enormous leaps in technological infrastructure and user reach, Botha underscored that the pace and magnitude of value creation in venture outcomes have inherent limits. He pointed out that during the last twenty years, the cumulative financial outcomes in the venture capital industry have reached an impressive total of over $380 billion. While that figure is undeniably substantial, he expressed skepticism that such growth can continue indefinitely simply by injecting more capital into the system. For Botha, the logic is clear: sustainable innovation and long-term success derive not from an abundance of funding, but from the capacity to identify, nurture, and concentrate resources around a relatively small number of genuinely exceptional companies. In that sense, his message was as much a caution to investors as it was a call to reassess the very nature of value creation in modern venture capital.
Sourse: https://techcrunch.com/2025/10/27/venture-capital-is-not-an-asset-class-says-sequoias-roelof-botha/
