"In the early days of Valar, a lot of VC’s passed on us because they didn’t believe we could raise the money." Yes, VCs will pass on a company out of fear that other VCs will pass on it. This is institutionalised insecurity. Venture capital emerged from opportunity of frontier technologies; huge idiosyncratic risk, huge upside potential. Power law meets portfolio strategy. Today it is dominated by low-agency herd animals that have traded that opportunity away for easier personal enrichment and job security. Instead of independent judgement, and the implicit accountability, they outsource to the collective via market signals that manifest in everything from round pricing to discourse online. This exposes venture capital to major systematic risk, unmanageable via portfolio design, exacerbating the boom-and-bust nature that leg-sweeps the market every few years. That's a taste of how problematic this behavior is. It gets much worse. The influence of signals fundamentally erodes the quality of decisions and the competence of investors. This basic economic principle is described by Keynes in "The General Theory of Employment, Interest and Money", and Abhijit V. Banerjee, in "A Simple Model of Herd Behavior", both cited in the article below. tl;dr — At some point, if signals are a significant driver of activity, and incentives aren't well designed, the market becomes a snake eating its own tail. All that matters is a mindlessly recursive consensus. Thus began the financialisation of venture capital; the point at which the opportunity mutated from chasing great investments to chasing pools of LP capital with "venture banks" as the brokers. This is why from 2010 to 2022, a period of generational abundance, venture capital produced increasingly bloated B2B SaaS companies and monkey JPGs. Technological stagnation. Capital that could have gone to reindustrialisation, to energy or biotech, was instead recycled through fragile ARR-printing machines into bigtech profits. Farming markups to raise more capital to farm more markups — progress be damned. This is all a direct result of the incentives. Indeed, these incentives are powerful enough to manifest as market capture: Implicitly, the VC media playbook that has emerged over the last decade allows firms to develop influence over signal-driven activity. Explicitly, research looking at VC activity indicates that firms who refuse to play along are strategically frozen out of capital networks. Evidence of this behavior is everywhere. Most investors have never known anything else. The following sentiments are all gateways for this financialisation and the associated market capture: - Venture capital is a relationship business - Access is all that matters - The best deals are competitive - Entry price doesn't matter - Consensus is good, actually Indeed, many established practices (like pricing on ARR multiples) are symptomatic of this problem, reflecting a goal of exploiting badly designed incentives (concentrating capital and power) rather than chasing outlier outcomes. Venture capital will continue to fail entrepreneurs, innovation and LPs (especially in times of abundance) until these incentives are addressed. There are exceptions, such as the early believers in @isaiah_p_taylor, but those exceptions should not make the industry complacent about glaring structural flaws and obvious failure. Frustration with this issue led me to write "Why venture capital should be consensus-averse", at around the same time @valaratomics was getting started: