Do venture partners' job-security and career incentives push them toward consensus rather than conviction?

Eric Paley · Sep 20, 2023

Venture's short-term incentives are misaligned with becoming a good long-term investor: chasing the consensus theme of the moment maximizes markups and TVPI and therefore fundraising ability, but does not pay off long term

Investing in the hot theme is the easiest thing to upsell to a later investor, which helps managers raise the next and bigger fund, while long-term returns come from nonconsensus bets

Scope: especially acute for new managers, whose need to reach a next fund he says he understands

12:12 20VC Roundtable: Is the VC Model Broken? The Biggest Disconnect Ever Between TVPI & DPI, Why Market Size is Dangerous, Why "Go Fast" is Terrible Advice, The Dangers of Raising Large Rounds at High Prices & Why Next Year Will See the Biggest Hiring Spree i

Hussein Kanji · Jan 20, 2025

Most venture firms have become momentum investors who write checks to get the next markup rather than to build durable long-term companies, and there are few old-fashioned venture investors left, especially in Europe.

Scope: particularly true in Europe

4:31 20VC: Why Large Seed Rounds Increase the Chances of Success | When to Sell in Venture | Why Multi-Stage Firms Do Not Do The Work | Is Europe Totally F****** and Why AI Means London Can Compete with the US with Hussein Kanji

Hussein Kanji · Jan 20, 2025

The shift to momentum investing was caused by free money plus career incentives inside large firms: employees get promoted by doing deals that get marked up by brand-name investors, regardless of whether any money is made.

salaried investors optimize for the next rung on the career ladder, and a markup from Sequoia or Tiger makes you look like you picked the hot company

Scope: applies to employees rather than owners of firms

5:33 20VC: Why Large Seed Rounds Increase the Chances of Success | When to Sell in Venture | Why Multi-Stage Firms Do Not Do The Work | Is Europe Totally F****** and Why AI Means London Can Compete with the US with Hussein Kanji

Nabeel Hyatt · Apr 4, 2025

The venture industry is effectively run by principals, associates and junior GPs whose incentive is promotion rather than exits, so they chase markups by front-running the next-stage investor instead of doing original work on the future

A principal wanting a promotion or a better job within two years needs markups, and the fastest route to a markup is dining with the later-stage firm, learning what they like this month, and investing one month earlier

Scope: characterized as 'basically the entire industry'

9:55 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Harry Stebbings · Apr 4, 2025

Venture is a packaging industry — acquire the deal, package it up, and pass it to the next investor

11:40 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Nabeel Hyatt · Apr 4, 2025

The packaging/markup-chasing approach is not just bad for founders and startups, it is a losing investment strategy

No one can know what will be hot in nine months without being very deep in the work

11:54 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Max Altman · Nov 21, 2025

Hierarchical venture firms are not incentivized to produce the best returns, because associates optimize for quick markups that get them promoted or poached rather than for long-term outcomes

An associate has very little carry and probably won't be at the firm the twelve years it takes to see liquidity, so their incentive is a deal that marks up fast

Scope: stops short of calling the cultures 'fucked up' — the problem is incentives, not culture

15:42 20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster

Harry Stebbings · Jan 4, 2024

Not needing the money gave the Homebrew partnership mental and creative freedom and purity in decision making

Decisions weren't driven by financial need

6:58 20VC: Predictions for 2024: What Happens to Early Stage VC Funding, Do a Load of Venture Funds Die, What do LPs Do in 2024, Does Figma Kill the M&A Market, Will IPOs Comeback & What Does a Trump Administration do for Startups with Jason Lemkin @ SaaStr

Nabeel Hyatt · Apr 4, 2025

Having nothing to lose — no long-term need to stay in venture — is an investing superpower, while a protectionist mindset focused on keeping your job and getting to the next fund is where most mistakes are made

A nothing-to-lose mentality lets you sit on the front end of creative risk and take the extra risk the business requires, whereas job protection biases you away from it

65:54 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Harry Stebbings · Oct 17, 2025

More successful investors make better investors, because established wins let them take risks that less successful investors cannot.

Without a track record you can't write a non-obvious check like that

49:35 20VC: The Startup Adding $1M ARR Every Week | Competing Against OpenAI's Codex and Claude Code: Who Wins | Why Gemini is Failing and GPT-5 Is Winning | Do Margins Matter in a World of AI | The Ugly Truth About AI Coding with Zach Lloyd, Warp

Harry Stebbings · Jun 20, 2026

Richer investors make better investors

Sequoia focuses on upside maximization and isn't fearful of LPs, next-fund fundraising or deployment-speed compression, so it can just invest in what it thinks can be mega companies

9:13 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Harry Stebbings · Jul 27, 2026

Richer investors make better investors

They stop worrying about downside mitigation and LPs re-upping and instead focus on upside optimization and how big something can be

51:39 20VC: Leading Anthropic's First Ever Round | Will Open Source Threaten Anthropic's Business | Do Margins Matter in a World of AI | Why Triple, Triple, Double, Double is Not Good Enough Today | Why Series A is Hard Today with Matt Murphy @ Menlo

Vince Hankes · May 3, 2023

Many firms could not have made the OpenAI investment because their organizations aren't structured to make decisions of that size

Writing intimidating, large checks requires a team and culture where individuals aren't blamed or punished if it fails

35:40 20VC: The OpenAI Memo: Why Invest? Is it too Late to Catch OpenAI? Are OpenAI's Models Truly Defensible? Does the Value in AI Accrue to Incumbemts or Startups - Application Layer/Infrastructure? What Happens with Regulation? with Vince Hankes @ Thrive

Vince Hankes · May 3, 2023

A single small team with autonomy across the whole investment cycle plus psychological safety is what enables a firm to make transformational investments

Not fearing being fired or demoted if it goes wrong is what allows people to lean into transformational technologies

36:45 20VC: The OpenAI Memo: Why Invest? Is it too Late to Catch OpenAI? Are OpenAI's Models Truly Defensible? Does the Value in AI Accrue to Incumbemts or Startups - Application Layer/Infrastructure? What Happens with Regulation? with Vince Hankes @ Thrive

Ryan Petersen · Jun 20, 2026 · hedged

A few funds, such as Founders Fund, somehow avoid this consensus-seeking behavior

Scope: 'somehow' — mechanism unclear

9:02 20VC: Why Remote Work is White Collar Fraud | Why Revenge and Patriotism are the Best Founder Traits | Two Questions Every Founder Needs to Ask | The Wild Story of Raising $1BN from Masa Son in an Hour Long Meeting with Ryan Peterson, Founder @ Flexport

Nick Chirls · Sep 6, 2024

An investor with a genuinely long-term view who doesn't need short-term markups or a new fund every two years can play a different game — derisking the company, proving experiments and building a real business model instead of optimizing for the next round

Some companies just take time and are better served focusing on the business than on fundraising; USV has done this well and portfolio companies that raised little are quietly crushing it

Scope: requires not needing near-term markups or fast refunds

45:16 20VC: Why VC is a Ponzi Scheme Today | Why Most VCs are Bankers | Why Big VCs Ruin Startups | Why Incentives in VC are Broken | Why American Dynamism is a Tool for VCs to Raise Money with Nick Chirls, Asylum Ventures

Harry Stebbings · Apr 4, 2025

The winning strategy is to back amazing founders with unique insights and hold for the long term

12:08 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Oren Zeev · Feb 2, 2026

The larger the partnership, the less alignment there is between individual partners and the long-term value of the fund

Individual partners are first and foremost managing their careers — they care about their own investments succeeding more than the fund succeeding, and have zero incentive to admit failure, so they push follow-on money into struggling companies to roll the dice and buy themselves time

41:23 Partnership size degrades alignment partners manage their own careers

Harry Stebbings · May 9, 2025

Partners at large firms transmit career pressure from their own partnership onto founders, whereas founders of firms don't face that pressure — which makes the latter better board members.

No one can fire the founder of a fund; LPs may not re-up, but partners at big firms can be let go and bring that heat into the boardroom.

42:20 Fund founders cannot be fired so avoid transmitting career pressure onto founders unlike employed partners

Larry Aschebrook · Jun 16, 2025

Silicon Valley's core problem is money managers losing focus on their fiduciary job and prioritizing the lifestyle, social circles and logo-name-dropping that come with managing capital

What matters is the value created for the people who trusted you with their capital and for the underlying companies, not being able to say at a dinner party that you invested in Wiz or OpenAI; the problem is worsened by people deploying capital who never have to sit in front of LPs and explain the losses

44:16 Status and lifestyle priorities crowd out fiduciary duty to lps

Nabeel Hyatt · Apr 4, 2025

Venture has more politics per human than almost any other kind of organization because every pre-exit measurement is a false profit

Until capital is actually returned and an enduring institution exists, all interim marks are games and packaging, so investors optimize for peer respect and end up in a packaging business for their partners

19:26 Interim marks are fake profits driving political behavior for peer respect

Harry Stebbings · Apr 8, 2024

In both venture and LP investing you get paid for the courageous bets you take, not the safe decisions you make, because this is a business of anomalies

Venture returns come from anomalies, so safe decisions don't earn anything

34:21 Returns come from courageous anomalous bets not safe consensus decisions

Doug Leone · Sep 14, 2021

The telltale signs an investor won't survive the abyss are fibbing about portfolio performance, continuing to invest at pace as if nothing happened, playing politics, and hiding behind senior partners' votes

People who too easily forget the $40m they lost show a lack of empathy, which he finds unnerving; he was never able to do that himself

23:28 Fibbing about performance playing politics and hiding behind votes signal an investor wont survive a downturn

Ryan Petersen · Jun 20, 2026

Non-owner VC partners optimize primarily to avoid getting fired, which means seeking consensus and channel-checking deals rather than backing conviction

You can't have colleagues at your firm think you're doing dumb deals — perception of a bad deal, not the actual outcome, is what costs you your job

7:42 Employed partners seek consensus to protect their jobs

Delian Asparouhov · Jul 29, 2024

A major way VCs destroy value is by transmitting firm-level anxiety onto founders, pushing for quick markups or short-term progress

Pressure from the fund for liquidity, or a partner's first big deal defining their next several years, creates an approximation of the public-market quarterly hamster wheel that gets imposed on the founder

47:53 Vcs destroy value by transmitting firm level anxiety onto founders