Fundraising Off Lofty Endgames

The dark side of kingmaking

Reading Will Manidis’ excellent post on endgame play made it hard to ignore the parallels with today’s fundraising market. And not in a good way.

Today, VCs are obsessed with lofty endgames.

Vision has always mattered in venture, but the scrutiny on execution is eroding.

Wild growth projections and infinite TAMs are being accepted without the fundamentals to support them. Things like user obsession, access to talent pools, and unique distribution are being looked at as details rather than the main focus.

We’re in a kingmaking venture economy. There’s an abundance of capital for the perceived winner in a hot, new category well before they have the product, user love, or traction to justify it.

The underlying cause is simple: funds have gotten massive. A16z, GC, etc. are looking for tens (or hundreds) of billions in an outcome. These firms want to concentrate capital aggressively into a market leader - and if you can create the winner, why wouldn’t you?

This dynamic isn’t irrational - it can work. Other VCs are less likely to jump into a space that already has a “winner” - even if crowned only by funding. And less competition increases the odds that the kingmade company succeeds.

But, this dynamic comes with real unintended consequences. It leaves little room for up front user discovery and assumes the company’s first product will be a hit.

When companies promise $100M of ARR in record time, they push hard on go-to-market early. Often before a product’s ready.

I’m increasingly hearing from buyers how much products are getting shoved down their throats that are poorly researched - and often poorly architected.

There are even companies today valued in the hundreds of millions (maybe even billions?) that no real user has touched.

The dark reality to all of this is that this cycle could produce more zombies than the 2021 cohort if startups can't hit the lofty goals tied to their sky high valuations.

AI has changed a lot, but it hasn’t changed what ultimately makes companies successful: building products users love.

Enduring companies are built on product quality and execution, not narrative alone.

Capital can amplify success, but it can’t create it.