An analysis of 547 Series B deals reveals two-thirds return less than 2x. This data demonstrates that a "spray and pray" strategy fails at this stage. The cost of misses is too high, and being even slightly worse than average in your picks will result in a failed fund. Discipline and picking are paramount.

Many sub-$500M venture funds are over-invested and under-reserved. While venture capitalists like Josh Wolfe predict a 50% failure rate for these "minnows," the Limited Partners (LPs) who fund them are even more bearish, believing the involuntary extinction rate will be closer to 90%.

The current fundraising environment is the most binary in recent memory. Startups with the "right" narrative—AI-native, elite incubator pedigree, explosive growth—get funded easily. Companies with solid but non-hype metrics, like classic SaaS growers, are finding it nearly impossible to raise capital. The middle market has vanished.

Many LPs focus solely on backing the 'best people.' However, a manager's chosen strategy and market (the 'neighborhood') is a more critical determinant of success. A brilliant manager playing a difficult game may underperform a good manager in a structurally advantaged area.

Acknowledging venture capital's power-law returns makes winner-picking nearly impossible. Vested's quantitative model doesn't try. Instead, it identifies the top quintile of all startups to create a high-potential "pond." The strategy is then to achieve broad diversification within this pre-qualified group, ensuring they capture the eventual outliers.

The seed investing landscape isn't just expanding; it's actively replacing its previous generation. Legacy boutique seed firms are being squeezed by large multistage funds and new emerging managers, implying a VC's relevance has a 10-15 year cycle before a new cohort takes over.

Aggregate venture capital investment figures are misleading. The market is becoming bimodal: a handful of elite AI companies absorb a disproportionate share of capital, while the vast majority of other startups, including 900+ unicorns, face a tougher fundraising and exit environment.

The increased volatility and shorter defensibility windows in the AI era challenge traditional VC portfolio construction. The logical response to this heightened risk is greater diversification. This implies that early-stage funds may need to be larger to support more investments or write smaller checks into more companies.

The venture capital return model has shifted so dramatically that even some multi-billion-dollar exits are insufficient. This forces VCs to screen for 'immortal' founders capable of building $10B+ companies from inception, making traditionally solid businesses run by 'mortal founders' increasingly uninvestable by top funds.