Can Venture Capital Handle More Founders and More Capital?

Venture capital is an interesting structure. On one side, you have capital contributed to venture capital funds by limited partners. I’ll call that the supply side. On the other side, you have founders building companies. Founders usually need capital and resources. Let’s call them the demand side. In the middle, you have venture capital making the connections between founders and resources (mainly capital). I guess that makes venture capital a marketplace, albeit one that requires lots of manual intervention.

Many people would argue that this marketplace is inefficient in its current state. I tend to agree, but I think more about its future state. What will happen if the supply of capital increases materially? As public markets continue to swing and inflation lingers, I suspect more capital will come to early-stage venture capital.

What happens if the demand side grows? More people are wanting to control their destiny and seeing entrepreneurship as a way to do it. And if recession-related layoffs increase materially, more people will look for their next thing. The result: many more founders.

All these changes are great, but I’m not sure venture capital could handle them. Would it be able to efficiently increase throughput and efficiently deploy capital? I suspect it could deploy it—but not efficiently. Those close to venture networks would receive more capital, likely creating a bubble.

I believe there’s an opportunity to rethink critical pieces of this marketplace to both improve throughput and reach founders outside traditional venture capital networks.