Venture capital's stakes are getting much higher

Tech startups aren't the only ones in Silicon Valley that want to be unicorns. More and more VC firms are seeking to raise new funds of at least $1 billion, either for new flagships or growth-focused sidecars.

Why it matters: The last time we saw such a trend was during the dotcom era's waning days.

Why this time it's different:

• Startups are staying private longer, thus requiring more capital.
• VCs need deeper pockets to at least avoid major dilution. Even Sequoia Capital has seen its original Airbnb ownership fall from 20% to around 13%, per a source.
• SoftBank, even though none of these new funds is really seeking to compete with it.
• There has been intense valuation inflation for venerable tech stocks —yes, even compared to the bubble days — so private valuations are really just following their public market peers.
• There are viable markets for new tech product (i.e., the startups aren't ahead of consumer and enterprise demand/willingness to try).
• Increased fund sizes in 2000-2002 were to write bigger checks for the same early-stage strategies, whereas this time it's for complimentary strategies.

Why this time it's the same:

• Per a longtime LP: "Never get confused. It's almost always a fee grab."
• Everyone is still judged on comparative returns, so individual funds won't be exorcised for broad-based growth-stage carnage.
• Fund capital is widely available, in part, because of a reverse denominator effect.
• The business just looks so easy right now, which is why so many novices (and corporates) are pushing in.
• Overcapitalizing startups hasn't become any smarter of an ROI strategy.
• Fund size tails will wag check size dogs, no matter how often VCs tell themselves they won't.

Bottom line: We won't know who's right for at least five years, if not longer. But for now we do know that the stakes have become much, much higher.