Scarcity vs. Abundance

We are in a period in which the most powerful tools are in the hands of the creators, and the entire application stack is being taken apart and rewritten. AI is the defining long-term innovation trend of our lifetime, and we will build and invest in it for decades to come. This is what venture is designed for: long term investment.

So why are so many VCs behaving like it's a short-term land grab? Massive seed and Series A rounds, immediate and larger B rounds, within a company's first few months of life, before product market maturity?

Innovation and capital are running off two different clocks. We're in the early stage of a long duration transformative innovation cycle, but the current capital cycle is behaving like it’s a short term event. Expectation timing is grossly out of whack, and for the majority of these dollars, it will not end well.

Our industry has a scarcity view of a market defined by abundance.

We’re in a capital bubble and an innovation boom.

The scarcity view

The headlines say capital is everywhere, but the data shows that most of it's going to very few companies.

US startups raised $412.7 billion in the first half of 2026, more than in any full year on record and 15% above 2021 (Axios). Megadeals of $100 million or more took 87.5% of those dollars, and AI took 86% (PitchBook-NVCA). Through September, AI represented 82.7% of venture dollars on just 45% of deal count (PitchBook-NVCA). Big dollars, concentrated in a few names.

It’s an even weirder time in seed: more than 40% of seed and Series A dollars early in 2026 went to rounds of $100 million or more (Crunchbase). Twenty-seven seed rounds of $100 million or more were announced globally from the start of 2025 to spring 2026. “Seed” rounds. Of $100 million (Crunchbase).

Why the rush? Why the idea that big, fast money can a winner make? Fear of missing out on the next OpenAI or Anthropic is extreme in this VC moment in all corners, as is greed. It’s easy to see why. Returns from those two companies alone may be some of the most astounding our industry has ever seen. All investors naturally look at those potential outcomes and want a piece of them, or something that could look like them, at any price. If everything “might” get to $1 trillion in value, then lots of prices can be justified. $10 billion looks cheap (right?). It’s human nature, but it doesn't make for good investing.

Underneath the rush is a belief that there will be only a handful of winners, and that this window is short. This logic means you have to own lots of these winners at any price, as early as possible. Investors are sprinting, but we have time and time again experienced company building as a marathon. A high valuation markup in month six tells you very little about actual exit value in year five, six, or seven. We have several fast marked companies in our own portfolio at True, but I’m not calling those wins yet.

A market defined by abundance

The scarcity view gets the market backwards. Development today is fast, almost free. Products get built overnight and find users right away. Creation capability is abundant. TAMs are abundant: we’re now talking in terms of all services as a TAM (~5-10x the TAM of software alone). This is a revolution, and the power is in the hands of creators.

Creative destruction is rampant, opening new spaces and previously “closed” markets. Solo founders can take on incumbents (see ArtCraft & the "clone wars" and so much in open source). New company formation is surging: Stripe Atlas incorporations rose 130% year over year in Q1 2026 (Patrick Collison via Techleap). AI’s power means more people are starting projects, side hustles, and companies on their own. Solo founders or small, efficient teams. We are already seeing tremendous democratization of capitalist opportunity due to AI at portfolio companies like Polsia, Audos, and others.

The sheer number of companies to be created is staggering. So too the value they will create.

AI is not winner take all. It is many take a lot.

But this won’t happen along a predictable path, and that’s a good thing for venture. Venture is designed to support exploration and experiment. Good things take time to build, and duration is a feature of early stage and startups.

What scarcity costs

Mega rounds and fast markups narrow a founder’s options. They create huge success hurdles well before value and competitive advantage are known, and big pref stacks limit degrees of freedom for founders and their teams. Too much, too soon is a classic trap in funding.

We are all shooting for the stars, but many great outcomes in tech have been moon landings along the way to distant galaxies. Exits of hundreds of millions or a few billion that returned funds and made careers built Silicon Valley. Today’s “perfect A rounds” of $100 million have no moons left to land on. Incentives misalign from the start when cap tables get unbalanced early, investors view their position as a "power law option bet”. The only win is the power-law outcome; anything short of it is failure. These rounds are not great for employees: the 409A jumps with marks, so every new hire’s options end up priced ahead of the product. It all works only if the market keeps going up, for a very long time. A company with one way out: that’s scarcity thinking.

Timing

When capital and innovation run on different clocks, risk is very high. When cycles change, fast marks evaporate in a second and windows slam shut. Big value, big raise deals get hurt the most. During the 2000-2002 downturn, many (many) investors took their capital back from over funded startups. I was there. Yes, boards distributed balance sheet capital back to VCs in the downturn. A lot of them.

In 2001 and beyond, the companies that survived weren’t the ones with the biggest rounds nor highest marks. They were the ones with the fewest commitments: lean teams, some customers, and cap tables that created the flexibility required to survive.

Large innovation platforms (electricity, railroads, Web 1.0, Web 2.0, cloud, mobile) create decades of opportunity, not months. Many came with a capital bubble that didn’t stop the progress of innovation. The telecom crash of 2000 bankrupted carriers and much of the ecosystem, but all that dark fiber went on to power and enable where we are today. Capital crashes. Innovation compounds.

Today, capital is in a bubble; technology is in a boom.

Independent of funding cycles, this technology is here to stay, and we all get to build on it. That is, unless you made a one way bet.

Oh, and VCs don’t make kings. The winning founders will build big castles over many years, and design them with care to outlast capital cycles.