I've spent the past decade thinking about incentives—not just the mechanics of deals or economics, but in the deeper, more fundamental way that shapes how we build relationships that endure. Most discussions about alignment in venture capital barely scratch the surface of what truly matters.
The Job
Let's start with the basics: What is a venture capitalist's job? Many would say it's to generate returns for LPs. Others might say it's to identify promising companies. Both miss the point entirely. These are outcomes, not purpose.
Our job, at its core, is to be the kind of partner that helps founders build enduring companies. Everything else—returns, reputation, fund size—flows from that fundamental truth.
Charlie Munger's wisdom about incentives isn't just a clever quote—it's the key to understanding why so much of venture capital is broken. When a $3M seed check represents 0.1% of a $3B fund, we're not really talking about partnership anymore. We're talking about optionality.
The Math of True Partnership
There's a mathematical beauty to proper alignment.
When you're raising your seed round, that $3M check can come from radically different places.
From a $60M fund, you're 5% of their portfolio – the kind of stake that makes your success genuinely matter to their future.
From a billion dollar fund, you're a rounding error. Often less than ~.1% of their fund…
This isn’t a critique of intent. There are brilliant investors at funds of all sizes. But when you occupy 5% of a fund’s portfolio, you shouldget a different caliber of attention.
At the earliest stages—when a company’s identity is still being forged—this difference compounds. The math creates the conditions where true partnership either emerges or withers.
The Service Business Reality
Fred Wilson wrote something years ago that fundamentally changed how I think about venture capital: entrepreneurs are our customers, LPs are our shareholders. Without entrepreneurs, there is no venture capital. Everything flows from backing exceptional founders.
At Benchmark, I learned first-hand that venture capital is a service business. The irony is that most VCs would never invest in a service business - they'd tell you it doesn't scale. Yet somehow we've convinced ourselves that venture capital should scale.
This service mindset demands a different kind of engagement. True partnership means having the courage to say hard things. To say no quickly and clearly. To have difficult conversations about strategic pivots and tough trade-offs when necessary. And most importantly, to help keep founders focused on what truly matters - building something customers and users love. These conversations only work when they come from someone who's truly in it with you - when they come from partnership rather than portfolio management.
Looking Forward
I believe we're at the beginning of a fundamental shift in venture capital. The multi-stage funds will continue to exist, but alongside them, a new (…old?) model is emerging. One built on true alignment, genuine partnership, and the patience to build something that lasts.
The question isn't just "Who do you want in the trenches with you?"—it's "Who's actually built to be in the trenches with you?"
The math matters. The incentives matter. The structure matters. But what matters most is building the kind of firm where alignment isn't just a term in a pitch deck—it's woven into every decision, every interaction, every day.
Because in the end, this work isn't about capital deployment or portfolio construction. It's about building relationships that endure and companies that matter.
Everything else is just noise.