The Realm Of Venture Circa 2014



Today’s venture capital landscape has never been more complex, and it will never again be this simple. It’s hard for entrepreneurs to navigate and VCs to differentiate. 

And while many believe increased competition has driven valuations up, that simply doesn’t tell the full story.

It’s time to set aside the Battle of the Bubble talk from this past year and consider the benefits to the complexity we see. Entrepreneurs have more options for raising capital, investors have more options for where to allocate their resources, and VCs have every reason to stand out by defining who they are and what their focus is.

Incumbents often find it tough to accept, but disruption is almost universally a good thing. That holds true for books and cabs, and it holds true for venture, too.

As a VC, I live and breathe this reality. But in talking with our limited partners and the entrepreneurs I work with on a day-to-day basis, I gained a new appreciation for just how complicated it has become for everyone to find their way in this shifting landscape.

I had to find a way to get at the big picture. (I also needed a way to cope with the five months between now and the start of Game of Thrones Season 5.)

The map that follows is no ordinary map, because the Realm of Venture is no ordinary place. What used to be simple – go to Sand Hill Road and meet some VCs – has become incredibly complex.


In order to capture the vast and various landmarks that defined this year in venture capital, I leaned on ideas more often found in fiction and fantasy:

  •  “Haves” and “Have Nots” separated by the Sea of Liquidity – where the Monster of the Markets decides who dies and who thrives.
  • The Mountain of Micro VCs and, to the east, the Land of Swelling Seeds – which have grown so quickly in fund size and sheer number that a new “pre-seed” category has emerged to back-fill at the earliest stages.
  • The Cape of Consistent Returns, where investors love to anchor their ships in high tide but where access can change depending on the motion of the moon.
  • Angel Island, with volcanoes of liquidity flowing from alums of Google, Facebook and Twitter, is starting to feel like its own continent.
  • The Incubator Archipelago, for every combination of geography, sector and founder friendliness.
  • Vertical Falls, where industry specialization promises to be the climbing harness of differentiated returns.
  • The Forest of Towering Private Company Valuations.
  • The Phalanx of Hedge Funds coming down from the north – armed with PIKs and ratchets and other exotic tools – on the hunt for unicorns and the billions of profits that used to be unlocked by public markets.
  • The Ocean of Traditional Funds, some of which have been lost in the Traditional Triangle of death, while others have corrected course and trimmed their sails and are now moving swiftly up the Channel of Opportunity toward the Land of New Markets.

I can’t provide the full legend here, not because each feature of this map is completely self-explanatory (some aren’t), but because in the Realm of Venture, as in reality, there’s no such thing as a cheat sheet.

Editor’s note: Steve Vassallo is a general partner at Foundation Capital.