Their investment pace almost always slows down. VCs are always in either Fear or Greed mode, so when everything looks much harder, the rate at which new investments happen slows down.
And investments take longer to happen. No one rushes to do a deal in one week anymore, or talks about “pre-emptive offers”.
And valuations come down, at least in part. They have to, mostly, when the overall public markets decline.
And VCs go into triage mode. They worry more about saving capital, and preserving capital, in their existing investments vs. making new ones.
Funds have 10+ year lifetimes. And they have to deploy their capital. So everyone still needs to get deals done. Just fewer of them, at lower valuations, and often, with less “next round has to get done soon” risk.
So everything slows down. But the funds are designed to withstand a downturn, or even two, in their 10-year lifecycles.