Why Venture Capitalists Shift Strategies: From Climate to AI and Beyond

How Venture Capital Theses Evolve—and Why

I keep a private document in my Google Drive titled “Fund Theses That Piss Me Off.” Every time I encounter a venture capital fund with a vague, buzzword-heavy thesis that still raises millions, I add it to the list. Over the past few years, I’ve noticed a troubling pattern: venture capitalists aren’t just refining their strategies—they’re making dramatic, sweeping changes to their investment theses, often overnight.

These shifts aren’t limited to individual funds. Entire sectors of the industry are overhauling their approaches. Take climate-focused venture capital, for example. A few years ago, climate VC was a white-hot category, attracting billions in funding. Today, most climate funds have either gone silent or pivoted entirely. One climate investor I used to work with now focuses on “AI for climate”—a term that, while technically possible, feels like an oxymoron.

Other climate-focused funds still invest in traditional climate solutions, but they’ve had to rebrand their language. Terms like “American dynamism,” “resilience,” “supply chain,” and “defense” have replaced the once-dominant climate rhetoric. This linguistic shift mirrors a broader political reality in the U.S., where climate change has become a polarizing issue.

Politics Isn’t the Only Driver—Tech Trends Matter Too

Political discourse isn’t the only force reshaping VC theses. Technology trends play an equally significant role. A few years ago, many generalist seed funds rebranded themselves as AI funds. More recently, the “SaaSpocalypse”—the fear that artificial intelligence will disrupt SaaS businesses—has sent shockwaves through the industry.

Five years ago, nearly every VC was either a SaaS or enterprise investor. Today, that’s no longer the case. SaaS investing has fallen out of favor, with many funds abandoning the space entirely. Last week, a fund manager I once considered a SaaS specialist told me he’s now only investing in consumer products—a dramatic departure from his previous focus.

The rise of large language models (LLMs) has lowered the barriers to entry in software development. With AI tools making it easier than ever to build and launch products, the product itself is no longer seen as a competitive moat. As a result, VCs are shifting their focus to sectors where replication is harder—such as hardware and consumer packaged goods. Not long ago, these spaces were considered uninvestable; now, they’re gaining traction.

What This Means for Founders

For founders, these rapid shifts create whiplash. One day, a fund is aggressively pursuing climate startups; the next, it’s abandoning the space entirely. The same goes for SaaS, AI, and other once-hot sectors. The message to founders is clear: adapt or risk being left behind.

Other Buzzwords That Have Fallen Out of Favor

• “Diversity”: Once a cornerstone of many VC theses, the term has become politically charged, making it risky for funds to use openly.
• “SaaS”: The SaaSpocalypse has made this once-dominant category seem obsolete in the eyes of many investors.
• “Climate”: Direct references to climate investing are now rare, replaced by euphemisms like “American dynamism.”

Why VCs Change Their Minds

The reasons behind these shifts are complex:

• Political pressure: Terms like “climate” and “diversity” have become polarizing, forcing VCs to rebrand their theses.
• Tech disruption: The rise of AI and LLMs has made traditional software investing less attractive, pushing VCs toward new sectors.
• Market trends: When a hot sector cools off (like SaaS), VCs pivot to the next big thing—even if it means abandoning their previous focus.

What’s Next for VC Theses?

Predicting the next shift is nearly impossible, but one thing is certain: VCs will continue to adapt. Founders who want to secure funding must stay ahead of these trends, tailoring their pitches to align with the latest buzzwords and investment priorities.