That’s the thesis of one venture investor I chatted with last week. They told me they see this as a perfect storm of zombie companies that raised too much money at unrealistic valuations in recent years—and found themselves stuck with business models that don’t make sense anymore in this tougher environment. “I think a lot of active board members are basically having honest conversations with founders and saying, ‘Hey, even if you really execute over the next three years, you’re just gonna get back to, like, half the valuation you’re at today…and even then it might be difficult to raise,’” they told me. The VC said they’ve noticed these asset sales more in the past two months.

Take Hopin, for example. The virtual conference company, whose business had cooled off as conference-goers flocked to in-person events, sold its events and engagement units to RingCentral last week. Hopin had garnered a nearly $7.7 billion valuation from VCs including Tiger Global, Andreessen Horowitz, and General Catalyst in the heady days of 2021, per PitchBook data. And per Axios, Hopin will use some of the proceeds of the sale, reportedly in the low hundreds of millions, to give liquidity to some of its investors. (Hopin didn’t return Axios’ request for comment.)

It’s something of a unique strategy for VC-backed companies, Kyle Stanford, senior venture analyst at PitchBook, told me. “We’ve never had, you know, 800 unicorns kind of stuck, in the U.S., without any good opportunity to IPO [and] no M&A market,” he said. “Now, they just have to go down a different route,” where “maybe they make a little money off of a sale, get a little more targeted within their business, cut costs, and then really use what capital they have left in their runway to drive down a more targeted path.”

He predicts we’ll see more of these carve outs in the coming months. 

What types of companies would use this strategy? Stanford notes that it will probably only be later stage or venture growth companies who are large enough to have revenue-generating business units, and who would need to sell those assets to streamline their business and potentially make themselves more attractive to acquirers or investors. The VC I spoke with, meanwhile, said these beleaguered companies are in industries across the board, but highlighted fintech, proptech, and crypto. 

Of course, other startups could benefit from the woes of their competitors. Every smart VC firm is going to be on both sides of the equation, the investor argued, and portfolio companies that are doing well will have a big opportunity to consolidate their competitors and cheaply acquire customers. They noted there are licenses and a variety of assets that can be attractive to other startups, although buyers need to be careful since they are likely acquiring a unit that’s burning cash. Still, the VC added that in many cases there aren’t many bidders and the prices are super low. (Their firm has at least one portfolio company looking into this right now.)

Investors themselves are also eyeing the opportunity. Last week, the Financial Times reported that Sequoia Capital’s wealth management arm Sequoia Heritage and Brookfield Asset Management are teaming up for a new fund focused on buying up cheap startups. 

Of course, venture investors are in large part to blame for this. After all, they poured billions into startups with the mandate to grow at breakneck speed and expand their business into a bunch of different areas. 

But the upshot is that there are likely a lot of zombies walking around the startup graveyard—and they might not be upright for long. 

ICYMI, a conservative activist’s lawsuit against Fearless Fund: A group founded by the conservative activist who played a key role in the recent rejection of affirmative action in college admissions is suing Fearless Fund, a VC firm focused on funding Black founders, who received only 1% of VC dollars in 2022. The lawsuit claims that the fund’s grant program, which awards Black female small business owners $20,000, is discriminatory against non-Black applicants. Fearless Fund, whose website says it is “built by women of color for women of color,” is backed by big companies including Bank of America and Costco. This could have major implications for those funds focused on evening out the playing field for Black founders. 

See you tomorrow,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Knot, a New York-based platform for card issuers to switch saved payment methods, raised $10 million in Series A funding. Nava Ventures led the round and was joined by Amex Ventures, Plaid, and others. 

- One Model, an Austin-based people analytics software company, raised $41 million in funding led by Riverwood Capital.

- D8X, a Zug, Switzerland-based decentralized exchange for derivatives, raised $1.5 million in pre-seed funding. Polygon Ventures, Axelar Network, Swissborg Ventures, and others invested in the round.

PRIVATE EQUITY

- Ares Management is investing an additional $75 million in Inter Miami CF, a Miami-based soccer team.  

OTHER

- JF Petroleum Group acquired Miller Construction Management, a Lakeland, Fla.-based installation and construction contractor. Financial terms were not disclosed.