Grading Ourselves in Venture 4.0

I haven't written in two weeks, and the world has changed twice since then.

Model releases, mega-rounds, IPO filings, and policy shifts are landing faster than anyone can absorb, insiders included. LPs have noticed, and they're asking hard questions about where venture fits in all of this.

Some changes are structural. AI is collapsing the cost of building software, making go-to-market and durable differentiation more important. Meanwhile, energy, robotics, and advanced manufacturing demand more capital and time than traditional venture was designed to provide. And power is concentrating among the tech giants who control the infrastructure.

Other changes are cyclical: bubbly Valuations, Fed tightening, election gyrations, and investing increasingly looking like trading. We've seen this movie before. There will be a reset.

All of this is landing on top of Venture 4.0, the slow-motion shakeout we called in 2024. In my last post, The Sorting, I described how the industry is dividing into capital aggregators, small alpha seekers, and an increasingly squeezed middle.

The shakeout is still unfolding. Surviving it is hard. Winning requires real differentiation. And there are massive post-reset spoils waiting for those who emerge stronger.

So how do VC firms differentiate? Here's what I tell LPs.

Every venture firm does some combination of four jobs.

FIND: Foresight and access. Finding is either getting access to the “hot” deals or having the thesis and judgment to discover hidden gems. Trendspotting and thesis building plus relevant brand and network. The best Finders are the ones founders choose when everyone else wants in or identify the breakout potential when everyone else is chasing the herd. Once you have your edge, sourcing becomes a function of brand, scouting, and upstream network.

FORGE: Help build. Forging is company building: the team, the strategy, the early traction. Board seats, advice, and recruiting help are the familiar part. The difference is between being helpful and making something happen that otherwise wouldn't.

FUEL: Capital and cash flow. Fuel is what powers the engine: money from markets and revenue from customers. The best Fuel providers deliver the right quantum and quality of capital and unlock revenue that otherwise wouldn't materialize.

FINISH: Realize the returns. Knowing when and how to exit is as important as landing a great investment. Being right about a company is only half the battle. Knowing when and how to realize the value is just as critical.

Doing all four jobs doesn't mean you're exceptional at any.

It’s easy to picture the qualities within each of the four jobs above in the context of basketball. And besides, who doesn’t love a sports analogy? (You can take the kid out of Indiana, but you can’t take the Indiana out of the kid…)

Venture 4.0 shifted the table stakes from NCAA to NBA, at a minimum. Yet plenty of VC firms didn’t get the memo. Networks, experience, introductions, and capital used to be differentiators. Today they're the price of admission. NBA is the right to exist; All-Star is the right to win.

Nobody needs to be an All-Star across the board. A firm can build its entire advantage around one or two things done extraordinarily well.

We all strive to be All-Stars, but we have limitations, some by design and some by circumstance. 

Here’s where I land, and where I stretch. I invite everyone else to take the same cold, sober look in the mirror.

Much of where I land comes back to commercial capital: generating revenue from customers, attracting capital from strategic and financial markets, and cultivating the relationships and deal experience that can lead to strategic outcomes. Call it a major in revenue and a minor in financing. 

VCs are built to track technological change. Far fewer can shape how a company makes money and raises it at scale, and as AI makes the product easier to build, that’s increasingly where companies win or lose.

FIND: NBA. I have the access and judgment to earn a spot on the floor, but I’m not at every after-after party, and I’m not a celebrity founder. I bias, perhaps to a fault, toward fundamentals over flow. I pick my lanes, geek out, roll up my sleeves, and go deep. That approach helped me invest in Uber’s Series B, lead Facebook’s growth round, and wedge onto Palantir’s cap table in 2016. More recently, it brought me into the Series B rounds of Laurel and True Anomaly, two next-generation companies on their way to breakout success.

FORGE: ALL-STAR. Advice gets you into the NBA. Judgment that changes outcomes makes you an All-Star. I've been lucky enough to sit on four sides of the table: operator, advisor, investor, board member. That perspective is why I'm often a founder's first call, an honor and responsibility I don't take lightly.

But judgment is only part of the equation. Thirteen years ago, I co-founded Silicon Foundry, a global corporate advisory firm now jointly owned by ACME and Kearney. Its 25+ professionals work directly with hundreds of major corporations, understanding their strategic priorities, commercial needs, and how decisions actually get made.

Foundry operates as an independent business, building capabilities and relationships we could never economically replicate inside a small venture fund. And because those relationships are built around the corporations' own agendas, they're often far more actionable than a captive VC network built around portfolio needs.

We didn't just build a network to help our portfolio. We built a business whose network our portfolio can benefit from.

FUEL: ALL-STAR(ish). Plenty of investors can make an intro. Foundry makes them systematic, putting the companies I back in front of the corporations most likely to engage. On capital, we’re not a big fund, so we don’t write the biggest checks. But I have a strong track record of raising capital for companies before the market catches on. My edge is connecting founders with decision-makers, power brokers, and advisors who can move the needle. I love opening doors my founders didn't know existed.

FINISH: ALL-STAR. Say what you want about investment bankers, but a decade of advising on more than $80 billion of financings and strategic deals (back when $80 billion was a lot) teaches one a little about the market. Sitting on countless boards, several public, teaches you the lessons missing from an MBA degree. And commercial capital comes full circle at the exit. The corporate relationships we build along the way can become the strategic buyers at the end. I often start exploring those possibilities before we even invest.

But that's just me. ACME has five partners, each with different strengths, experiences, and blind spots. We challenge each other, keep each other's biases in check, and know when to pass the ball. We've spent years on the court together, learning who's best positioned to take the shot.

We don't need five partners who are All-Stars at everything. We need a team that's exceptional where it counts, knows its limitations, and plays better together than apart.

That's the challenge for every firm in Venture 4.0. You can try to do it all. But being able to play every position doesn't make you an All-Star.

Know your game. Build your team. Differentiate. Earn your right to win.