Charles HudsonFounder and Managing Partner, Precursor Ventures

Can venture capital firms really merge effectively?

24 Sept 2025 · 1 min

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Charles Hudson argues that venture capital firm mergers are difficult and often ineffective. Key points: (1) VC firms have long-lived fee streams tied to each fund (often 10–15 years), which provide financial insulation and reduce incentives to merge purely for survival; (2) ego and cultural conflicts make combining teams hard; (3) merging two struggling firms rarely produces a successful combined firm, and acquiring a poorly performing team offers little value because VC output is decision-making and portfolio access; (4) failure can increase industry churn, since members of failed small funds may go on to start new firms.

Chapters

One, once you raise a fund, you have a fee stream that lasts you essentially for the life of that fund. Could be 10 years, could be 12 years, could be 15 years. But you, you have a fee stream that can keep you in business even if you're unable to raise your next fund for a really long time in a way that few other businesses allow you to do. Second, I think the egos involved in this business oftentimes make it difficult to merge firms. And also I often question if you have one firm that couldn't raise money or was having challenges and another firm that was having challenges. Putting those two firms together is unlikely to produce a new winner. If you have a firm that's doing well and a firm that isn't doing well, the firm that's doing well is like, well, why would I want to acquire the assets of a. There's no real aqua hires in venture, maybe occasionally, but like not like there are in startups where like, oh, this person has talent. Because in venture, the output of your talent is the decision making and the companies you get into. And if that's not good, I'm not sure what you're really acquiring. And I think the other thing that's worth remembering is you can have a three person venture fund that fails where each of those people independently goes off and starts his or her own venture firm. So one venture firm that fails can actually create three brand new venture firms. So it's not like failure always reduces the number of firms in the industry. Not.