“90% of VCs Are Neutral to Negative Value”: Kyle Harrison on the Evolving Game of Venture Capital
Run the Numbers
Fund Size Is Strategy and Founder Fit
Discussion of why large firms back multiple AI rivals, how a fund's size dictates deployment and return targets, and when high-priced rounds misalign founder incentives.
The venture capital landscape is evolving, and a founder’s choice of fund size and partner could make or break their business. In this episode, CJ sits down with Kyle Harrison, General Partner at Contrary and writer of the Substack Investing 101, to make sense of the changing incentives and power dynamics in the field of venture capital. He explains how capital agglomerators and cottage keepers are playing dramatically different games, how the ethics of backing competitors have changed since the advent of AI, why a fund's size is its strategy, and what the potential pitfalls of dilution could be for founders. The conversation also covers why the line between hype and tangible business value in AI is so blurry, the role of narrative as an economic driver, and why the most valuable thing a VC can offer might just be "borrowed credibility.”
—
LINKS:
Kyle Harrison on LinkedIn: https://www.linkedin.com/in/kyle-harrison-9274b278/
Contrary:
https://www.contrary.com
Investing 101:
CJ on X (@cjgustafson222): https://x.com/cjgustafson222
Mostly metrics:
https://www.mostlymetrics.com
LINKS MENTIONED:
* “The Unholy Trinity of Venture Capital”:
* “The Horse, The Jockey, or The Whole Race?”
* Endowment Eddie on X (@endowment_eddie): https://x.com/endowment_eddie
* “Institutionalized Belief In The Greater Fool”:
* “The Unbundling of Venture Capital”:
* “The Productization of Venture Capital”: https://kwharrison13.com/essays/the-productization-of-venture-capital
—
TIMESTAMPS:
(00:00) Preview and Intro
(02:23) Sponsor – Navan | Rillet | Pulley
(07:13) VC Models: Cottage Keepers Versus Capital Agglomerators
(11:16) Balancing Taking On Money and Finding Great Investments
(16:35) Sponsor – Brex | Aleph | RightRev
(20:54) Founder-Friendliness: The Ethics of Backing Competitors
(26:33) When Fund Size Sabotages Outcomes
(32:32) The Sins of Omission Versus Commission
(36:02) The Dilution Trap for Operators in Venture-Backed Companies
(38:17) Underestimating the Magnitude of the Outcomes
(40:35) AI Hype, Valuation, and Real Business Impact
(45:37) Market Psychology: Narrative and Story As Economic Drivers
(48:21) Valuation: Cursor and Windsurf
(52:50) The Unbundling of Venture Capital: What Founders Really Hire VCs For
(1:01:47) Things To Consider When Choosing a VC
(1:04:35) FTX Lessons & Compounding Growth
(1:10:02) Kyle’s Predictions for the Future of VC
—
SPONSORS:
Navan is the all-in-one travel and expense solution that can give you access to exclusive, proprietary Nasdaq-validated data that reveals what's happening with corporate travel investments. See the Navan Business Travel Index at https://navan.com/bti.
Rillet is the AI-native ERP modern finance teams are switching to because it’s faster, simpler, and 100% built for how teams operate today. See how fast your team can move. Book a demo at https://www.rillet.com/metrics.
Pulley is the cap table management platform built for CFOs and finance leaders who need reliable, audit-ready data and intuitive workflows, without the hidden fees or unreliable support. Switch in as little as 5 days and get 25% off your first year: https://pulley.com/mostlymetrics.
Brex offers the world's smartest corporate card on a full-stack global platform that is everything CFOs need to manage their finances on an elite level. Plus, they offer modern banking and treasury as well as intuitive expenses and accounting automation, bill pay, and travel. Find out more at https://www.brex.com/metrics
Aleph automates 90% of manual, error-prone busywork, so you can focus on the strategic work you were hired to do. Minimize busywork and maximize impact with the power of a web app, the flexibility of spreadsheets, and the magic of AI. Get a personalised demo at https://www.getaleph.com/run
RightRev automates the revenue recognition process from end to end, gives you real-time insights, and ensures ASC 606 / IFRS 15 compliance—all while closing books faster. For RevRec that auditors actually trust, visit https://www.rightrev.com and schedule a demo.
##VentureCapital #VC #Startups #Founder #FundSize
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit cjgustafson.substack.com
The AI-powered Podcast Player
