Guest opinion: When I moved to Seattle in 2000 and started in the business world, I read the book “The Silicon Boys: And Their Valley of Dreams,” which told the story of how venture capital moved the ecosystem.
Businessmen work hard day and night in their garages. Venture capitalists find these entrepreneurs, write “small” checks for ownership and partner together to build blue-chip companies. John Doerr of Kleiner Perkins alone has backed Intuit, Netscape, Amazon, and Google.
More than 25 years later, venture capital is going through a dramatic evolution, chasing once-in-a-lifetime IPOs like SpaceX, Anthropic and OpenAI. There is more venture capital available than ever, and it’s harder than ever for most innovators to get funded, especially if you’re not working in basic AI.
Today’s founders need to think hard about other ways to finance and grow, rather than relying on venture capital. But before we get to those solutions and ideas, here are a few examples of what’s happening in the market.
Anthropic Envy: The Wall Street Journal covers Spark Capital’s story of Yasmin Razavi, a former McKinsey consultant who invested $75 million in Anthropic when the Silicon Valley giant passed a $4 billion valuation in 2023. That stake is now worth $7 billion – nearly 100x in three years! Silicon Valley is now chasing this pattern.
More money, fewer winners: By 2025, US firms will spend an estimated $319 billion, according to the PitchBook-NVCA Venture Monitor. In the first half of 2026 alone, they invested 412.7 billion dollars, more than all of 2025. Capital has never been in abundance. But according to Silicon Valley Bank, 33% of all US dollars went to the top 1% of companies by valuation, up from 12% by 2022.
The “right company” seed ratings are high. The bar for the next round is a little higher. It’s almost double what it was a few years ago.
Peter Walker from Carta tracks seed prices over time showing that the top 5% of seed deals increased 177% year over year, rising from about $72 million to $200 million. Carta found that 30.6% of companies that raised seed in early 2018 reached Series A within two years. In the class of 2022, that number dropped to 15.4%.
The practical takeaway for founders: The average revenue you now need to raise a Series A has nearly tripled, to around $3.5 million in ARR.
VC for a select few: A company that could have grown easily a few years ago is now completely unsustainable. Reid Christian from CRV says the way to promote now is to “Read it in Speech.” Two types of startups are funded, he says: “Crudely proven groups with vision” valued at $50-200M, and later rounds that “don’t require any thinking.”
If the founders are the right people – “small, cracked, or repeating,” the right schools, “nepo, etc.” – capital letters you get. Everyone else, he writes, “is just fighting for pattern recognition in the lemming industry.”
So what’s a founder to do?
Go and raise a VC: If you’re building the next OpenAI, go raise a VC. Find the best team and throw the fence. Make sure you also make your growth rates match the high expectations of a VC-backed company by 2026.
Heather Redman of Flying Fish Partners says that companies “get pre-funding at ‘modest’ valuations and then go on crazy deals to show impressive growth … and raise successive good rounds.”
Seattle’s Tin Can is a great example of a contrarian bet (baby calls) that has shown incredible growth and successful VC funding.
Find other sources of income: Ascend’s Kirby Winfield says, “If you don’t have reasonable confidence in hitting $3M-$5M ARR within 18-24 months of your first commercial contract you probably shouldn’t scale the business in 2026.”
If that’s not you, that’s okay — then equity in a valued business might be the wrong tool. Other sources of income to consider:
- Angel funding: Individual angel investors write smaller checks, move faster, and don’t carry the same expectations for growth or block rights as institutional VCs. A round put together from angels allows you to raise less, give up less ownership, and avoid the trap of signing up when the lead investor’s follow-up decision dictates your next round. The tradeoff is more administrative relationships and fewer firecrackers behind you to get funding — but you retain control of your timeline.
- Business credit: For companies with revenue and real margins, corporate debt extends the line without being reduced. It is a loan taken on the side or immediately after the equity cycle, which is paid over time with interest. The catch: it usually takes an equity sponsor behind you, and it’s a debt to pay off, so it works best as a bridge to a clear point.
- Income-based funding: This method, which leverages capital against your recurring profits, is one of the fastest growing segments of startup finance. If you have predictable revenue and realistic margins, you have more options than a priced equity round. Providers develop multiples of your monthly recurring revenue and are paid as a percentage of it. It’s built exactly like the company that brought it to market: it’s too small for a big cycle, too healthy to need.
Get instant profit: The cheapest way to increase your income. The best founders aren’t thinking about VC or chasing the next investment milestone. They look down and build their businesses. AI has made this easier than at any time in history. The small group that controls its burning controls its destiny.
Aviel Ginzburg of the Foundations and Founders’ Co-op offers this breakup advice for founders: “Know that business is just as confused as they are. We’re not security guards here, we’re being disrupted.”
