The Opportunity Fund concept has been around for at least 15 years, but has only become prominent in the last few years. These funds are primarily designed to support the growth of the most promising corporate startups as they mature. For example, if a venture capital firm identifies the above-average performance of a particular portfolio company, it may decide to invest additional capital to support its growth.

Y Combinator recently made a surprising move - the renowned investor, known for backing successful venture capital-funded companies such as Airbnb, DoorDash and Stripe, announced that it will no longer raise investments in its late-stage portfolio companies.

In 2015, Y Combinator began investing in its most successful startups through its first $700 million continuous fund. The strategy, commonly referred to as "Opportunity" or "Select" funds, began gaining popularity among other early-stage venture capital firms around 2010. It became more prevalent during the pandemic years, when company valuations skyrocketed, making it increasingly difficult to retain ownership stakes in companies with the potential for a massive exit (e.g., through a sale or IPO).

However, with the rise in interest rates and the sharp decline in publicly traded technology stock prices over the past year, investing in advanced startups has lost its appeal. In 2022, a staggering $9.4 billion was raised in 70 venture capital funds that carried the term "Opportunity" or "Select" in their name, according to PitchBook data. This year, however, the situation has changed dramatically - only $400 million has been raised in six funds to date, and investors expect that number to remain subdued for the foreseeable future.