The Institutionalization of Venture Capital
When being delusional becomes mainstream
Venture capital was born in defiance—an industry built on backing the improbable, the fragile, the wildly ambitious. Early figures like Arthur Rock weren't following VC playbooks circulated on LinkedIn; they were staking reputations and fortunes on futures most dismissed as fantasy.
Today, venture capital looks very different: large fund structures, professionalized pipelines to break in, co-investment protections, and standardized pattern-matching dominate the field. Risk—once personal, visceral, existential—is now diversified, hedged, and sanitized.
This shift is arguably inevitable as any once-nascent industry matures. But it raises a deeper question: If venture capital was once defined in opposition and by rebellion against the status quo, what does it mean when it starts to resemble the very incumbency it sought to disrupt? Or perhaps more uncomfortably: what if it always did?
Pattern Matching Is Nothing New
The mythology of the bold contrarian still remains. But in practice, investors have always chased a kind of safety—whether through pedigree, network, or consensus around "hot" categories like AI, climate tech, or fintech. Backing a Stanford-educated, Y Combinator-vetted founder feels safer than betting on an orthogonal thinker who doesn’t fit obvious molds.
And as we look back, this pattern was there too. Even some of the earliest venture investments leaned heavily on familiarity: technical credibility, reputational signals, proximity to established institutions. Georges Doriot’s backing of Digital Equipment Corporation and Arthur Rock’s early investment in Intel were bets on people who were outsiders in some ways—but also insiders in others, armed with hard-won expertise and institutional validation.
Today's hoodie-wearing founder with a blue-chip résumé isn't so different from yesterday's engineer from MIT or Fairchild.
The logos have changed. The human impulse to de-risk the future by finding patterns that feel familiar has not.
Institutionalization Isn't Decline—It's Adaptation
This continuity reframes the story. Maybe venture hasn't "lost its edge" so much as adapted to scale.
A more stable venture ecosystem can underwrite bolder bets: synthetic biology, deep tech, climate infrastructure—domains that require patient capital and high tolerance for uncertainty. At the same time, professionalization has broadened access, making venture less the exclusive playground of wealthy mavericks and more of a global, democratized market.
The risk today isn't that venture is too structured. It's that conviction is replaced by consensus—and the improbable, truly outlier ideas get overlooked in favor of safer proxies for success.
Startups Are No Longer Anomolies
To continue to metaphorically shadowbox myself, it’s worth noting that startups themselves aren’t outliers anymore either. The AI arms race alone has unleashed more new companies in a quarter than used to emerge in a decade. In 2023, the U.S. saw a record-breaking 5.5 million new business applications—a 56.7% increase from 2019, and a staggering 1,285% increase compared to 2009.
Startups are no longer the scrappy exceptions to the economy. They're increasingly its primary engines—fragmenting into specialized, fast-moving, identity-driven tribes.
Creation itself is speeding up. And with it, the culture of work, innovation, and community is decentralizing.
From Globalization to Localization
This decentralization mirrors a broader shift: from globalization to localization.
With governmental focus on Main Street, a trade war incentivizing onshoring, our labor market restructuring, and communities seeking tighter bonds of proximity and purpose, startups are poised to play a civic role, not just an economic one. Funds, in turn, will evolve from financiers to enablers of new micro-societies.
The startup won't just be a company. It will be a node of community-building.
The venture fund won't just be a source of capital. It will be a curator of identity and belonging. (If you’re new here, re: The New Commodity of Identity; The Great Recalibration).
Language Always Lags Reality
As I gathered information for this article, I chuckled when I found “The History of VC” articles citing J.P. Morgan, the Vanderbilts, and even Christopher Columbus as the first VCs.
Which led me to be reminded of this undeniable truth: we mythologize history. The Morgans and Vanderbilts were financiers, builders, patrons. The category only applies retroactively, once enough patterns consolidated into something recognizable.
We're living through a similar shift now. The structures, ambitions, and behaviors reshaping startups, investing, and community-building may already be something other than "venture capitalist" as we’ve defined it. Maybe we just don’t have the vocabulary yet.
Language, like everything else we mythologize after the fact, is always late to the party.
A Startup and Investment Society
Look ahead 30, 50, 100 years: the trajectory points toward a world where nearly everyone is either working at a startup, founding one, or investing in one.
"Venture" won't just be a corner of finance—it could become the dominant cultural mode.
In that world, today’s institutionalization of venture won't be seen as decline. This catastrophizing is part of our tendency to hipster-ize everything. This is the proverbial “I found that band before they were cool” of it all.
That band going platinum isn’t the end of the world. If anything, as their biggest fan, it’s what you should want. It’s just the end of the world as you know it. Which, in venture, is the name of the game.