The current dichotomy that exists in the VC ecosystem is doing founders a huge disservice.
Large Seed-focused funds have the wrong incentive structures in place to encourage true good behaviour.
In 2021, seed rounds led by these funds were being done at $30-50M valuations and founders were being given $5-10M at the Seed stage, with perhaps a product in market and no product-market fit.
From the outset, that sounds super founder friendly. With flexible terms and a lot of upfront capital, what could go wrong?
In 2023, we are starting to see the effects of this in full force. Numerous companies are needing to take downrounds to survive, and many are in a similar state to where they were in 2021 with minimal progress and bloated costs.
Venture capital needs to return to a milestone-based funding model if it wants to survive.
This week's article is on whether it's possible to scale an early-stage venture capital fund (Spoiler: it's not) and how large fund's are structured and their incentives to drive founder's to the edge. Link in the comments!
Large Seed-focused funds have the wrong incentive structures in place to encourage true good behaviour.
In 2021, seed rounds led by these funds were being done at $30-50M valuations and founders were being given $5-10M at the Seed stage, with perhaps a product in market and no product-market fit.
From the outset, that sounds super founder friendly. With flexible terms and a lot of upfront capital, what could go wrong?
In 2023, we are starting to see the effects of this in full force. Numerous companies are needing to take downrounds to survive, and many are in a similar state to where they were in 2021 with minimal progress and bloated costs.
Venture capital needs to return to a milestone-based funding model if it wants to survive.
This week's article is on whether it's possible to scale an early-stage venture capital fund (Spoiler: it's not) and how large fund's are structured and their incentives to drive founder's to the edge. Link in the comments!
