Two founders raise $10M each. One's a Series A. The other's a Series V.

V is for Vibes.

Dear friends,

One week in January, I happened to have two conversations with founders that perfectly captured the wild paradox that is venture capital today.

One had just closed a ~$10M Series A. This company had mid to high seven figure recurring revenue and was growing strongly, if not exponentially, year over year. The round took MONTHS to come together. Pitched all the VCs. Due diligence dragged on. Every number was scrutinized. It took a superhuman effort to get it done.

The second founder I talked to had also raised $10M… but this one was a pre-seed. Off a pitch deck. No product. No traction. No team. Just a founder and an idea.

If I told you that founder A (literally, the one who raised the A) is a woman, and founder B is a man - both experienced founders with prior exits - you might jump to the conclusion that what’s underneath this trend is not a paradox at all - and the numbers definitely back that story.

But gender is also not the only possible explanation for this particular phenomenon, and definitely not in 2025, when VC fund sizes have exploded right into the stratosphere. If you’re an experienced VC you know exactly what’s behind these two stories. If you’re new to the space, here’s how I would break it down:

Big fund venture capital is not actually about investing in great businesses. It’s about investing in great potential. Potential that can’t be measured, only perceived. And that perception is shaped by pattern-matching, insider signals, and often, just vibes.

In venture, especially early stage VC, investors aren’t optimizing for the success of every company in the portfolio. It is expected that most companies will be write offs, or return a small amount. And that one, or two, or a handful of companies will have a huge exit and return the entire fund multiple times over. The bigger the fund, the bigger those exponential outcomes need to be.

It’s not rational. But when it works, it works BIG.

Selling a dream vs selling reality

There’s two different ways that startup rounds get priced:

The first is akin to Finance 101. When startups have trajectory - revenue, cost of sales, and enough history to make reasonable future projections - the net present value of the company can be objectively calculated.

The second is Microeconomics 101 - or the law of supply and demand. If supply is limited and demand is high, bidding wars ensue, and the price of the asset increases. If demand is irrational, price increases irrationally too.

Hot rounds, of course, happen when pricing is irrational. And that’s more likely to happen when there’s little to no real data. Because without data, the dream is still alive. But once numbers enter the picture, investors behave differently. Suddenly, they’re not buying a story—they’re running net present value models.

When we evaluate each individual investment, VCs operate on probabilities. On “day one”, a startup’s outcome probability curve is highly skewed: maybe there's a 98% chance it goes to zero and a 2% chance it’s the next Google. With no real data, the Google dream is fully intact. The less there is to measure, the more room there is for imagination. The more room to price irrationally.

But what happens when a startup actually builds something? When there’s revenue, users, and product in-market? Now investors can price it rationally. Now the curve shifts. Perhaps now there’s a 50% chance it goes to zero; and a 50% chance it’s a 9-figure acquisition. The odds of a great outcome go up—but the odds of an exponential one seem lower.

So if you’re a founder, and your company is growing steadily but not exponentially, raising gets harder—not easier. Because you’re no longer selling a dream. You’re selling reality. A lot of VCs will pay more for the possibility of exponential growth, than the reality of pretty good growth. And as VC funds get bigger and bigger, and the size of exit they need to return their funds gets bigger and bigger, the premium on the dream vs. reality gets bigger and bigger too.

So what is success?

This is not to say that Startup A is a bad investment - objectively, it’s a better one. It may not work for massive funds - but it easily returns smaller ones. Which tend to outperform the big guys anyway.

Most importantly - and this is something I’ll never get tired of telling founders - always keep in mind that a hot round does not actually equal success. Success is not this round—it’s building something real. Creating value for your customers, your team, your investors, and yourself.

Success is not this round. It’s the eventual outcome for everyone involved.

And here’s the real kicker: the fact that one founder raised off of vibes while another had to fight for every dollar? That tells us very little about which company will succeed. But the grit each founder demonstrates - that speaks volumes.

Until next time,

Leslie