VC industry faces 'DPI crunch' as dry powder evaporates and returns narrow

VCs managing large dry-powder pools are facing margin pressure as realized returns compress and limited partners demand distributions faster than new capital deploys. The 'DPI crunch' is forcing fund managers to tighten check sizes and focus on Series B-C compression and secondary sales rather than seed bets.

This reshapes deal flow: mega-funds backing consolidation plays and late-stage infrastructure deals, while micro-VCs and syndicates capture seed-stage capital. For CTOs seeking venture backing, this means shorter windows to raise and higher proof bars at early rounds—proof-of-product is now table stakes.