Small vs Mega Funds A power shift in Venture Capital led by First Time Funds

Small funds often need mega funds. The traditional venture conveyor belt sees breakout companies relying on deep-pocketed follow-on capital to scale.But mega funds always need small funds. Without early-stage backers taking the initial leap, there's no pipeline of breakouts to write those big checks into.This asymmetric dependency creates an interesting power dynamic that's increasingly tilting in favor of smaller, nimbler funds.Founders are starting to question the conveyor belt altogether. The rise of Seed Strapping — raising enough to build, ship, and drive profitability early — is becoming more common. Today, you can build something huge with a lean team and very little capital.Take DoNotPay: raised a Series B four years ago, now significantly profitable and paying dividends to investors. Its last valuation was $210M. Will it return a large fund? Probably not. But for its early backers? It just might deliver exceptional returns.

The New Capital Efficiency Reality

Modern startups benefit from transformative changes that favour capital efficiency.Back to the irony — small funds may sometimes need mega funds. But maybe less than before. Mega funds? They'll always need small ones to get the party started.As this power dynamic continues to evolve, we'll likely see smaller funds commanding more favourable terms and greater influence in the venture ecosystem. The most successful mega funds will be those that build genuine partnerships with operator-led Fund 1s rather than viewing them merely as sourcing channels.The conveyor belt isn't broken, but it's certainly being reimagined.