Startup investors are warning of rising “zombie” venture capital firms amid falling tech valuations. Zombie VC firms are still generating cash, but they are so heavily indebted that they can only cover fixed costs and debt interest, not the debt principle itself. They continue to manage the investments they made from previous funds but are unable to raise their next funds. Analysts expect the number of zombie VC firms to rise as interest rate increases, making it more costly to carry debt. VCs, take funds from limited partners. As startups lose their valuations, LPs become more conservative about issuing funds.