“90% of VCs Are Neutral to Negative Value”: Kyle Harrison on the Evolving Game of Venture Capital
Run the Numbers
Risks: Missed Winners, Dilution, and AI Hype
Kyle contrasts sins of omission versus commission, explores dilution's impact on founders and employees, and questions whether AI funding is delivering durable business value versus narrative-driven hype.
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.”
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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
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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
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SPONSORS:
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##VentureCapital #VC #Startups #Founder #FundSize
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