Oct 21, 2022 · 1h 0m · news
Kyle Harrison: Why 75% of Active Investors Will Disappear in the Next Few Years | 20VC #940 · 20VC with Harry Stebbings
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In this deep-dive interview, venture capitalist Kyle Harrison joins host Harry Stebbings to analyze the structural, cultural, and mathematical shifts reshaping the venture capital landscape after a massive market correction.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 21.7% of the talking time here. How this is scored →
Harry as informed peer 5.5 Guest teaching 4.7 Guest disagreement 2.0 Harry pushing back 3.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:35 Guest rejects host's premise on VC incompetence
When Harry calls the phrase 'nobody knows what they're doing' complete bullshit, Kyle directly counters his host by explaining that VCs use that phrase to soften the blow of being wrong, insisting that top performers act deliberately and study their craft.
Hardest push from Harry ▶ 7:38 Host explicitly rejects guest's vague answerHarry bluntly refuses to accept Kyle's generalized response regarding Index Ventures, interrupting him directly with 'I didn't take that vague answer' and demanding a single actionable takeaway.
Biggest teaching moment ▶ 35:28 Guest explains the Blackstone of Innovation thesisKyle delivers an in-depth breakdown combining Stephen Schwarzman's biography with financial platform dynamics to show how Andreessen operates as venture capital's AWS infrastructure.
Harry holds his own ▶ 28:54 Host details high-frequency vs. seismic venture brandingHarry demonstrates deep domain mastery by laying out a clear taxonomy of venture content strategies, contrasting rare seismic posts from Bill Gurley and Pat Grady against high-volume social output.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Filmmaking to Venture Capital: Kyle Harrison's Circuitous Journey | 1 | 2 | 0 | 0 | The host provides a warm, welcoming introduction and invites the guest to share his career backstory. The guest outlines his circuitous route from filmmaking to creating a marketplace business and eventually entering venture capital. | |
| Career Retrospective: Core Investing Lessons from TCV and Coatue | 5 | 3 | 2 | 3 | The host sets up a quick-fire review of lessons learned at major funds and interjects to forcefully assert his own recent belief that markets matter far more than founders. The guest agrees in part while explaining Coatue's concept of TAM arbitrage. | |
| Index Ventures & the Psychology of Deliberate Practice | 6 | 4 | 3 | 6 | The host refuses to accept a vague answer from the guest about Index Ventures and presses for a specific takeaway. Later, the host calls common VC advice bullshit, prompting the guest to reframe why people claim nobody knows what they are doing. | |
| The Unbundling of Venture and the Rise of Renegade Brands | 6 | 4 | 3 | 5 | When discussing firm differentiation, the host challenges the guest's thesis by arguing that power is migrating away from institutional brands toward individual partners like Logan Bartlett. The guest acknowledges the point and expands on his renegades framework. | |
| Defining the Substandard: Cultural and Behavioral Flaws in Venture | 5 | 5 | 1 | 2 | The host openly declares his cynicism regarding VC firms, calling most of them substandard, and asks the guest to define average funds. The guest responds with a structured three-part framework spanning economics, internal culture, and bad behavioral practices. | |
| The Slow Death of Venture Funds & LP Reinvestment Obligations | 7 | 4 | 3 | 6 | The host details a three-stage framework of VC inputs and interjects to challenge the guest's timeline on firm mortality, arguing fund death rates will only accelerate if structural LP incentives change. The guest engages in lively debate, noting he is deliberately divisive. | |
| LP Incentive Structures and Progressive Family Office Allocation | 6 | 5 | 2 | 4 | The host diagnoses misaligned LP incentive structures driven by fixed salaries rather than carry alignment, then poses a hypothetical family office scenario to the guest. The guest outlines diversification strategies and targeting high-quality talent nodes. | |
| Demystifying 'Community' and Personal 'Vibes' in Modern Venture | 5 | 5 | 2 | 6 | The host directly challenges industry terminology, dismissing phrases like community and personal vibes as fluffy words. The guest responds by grounding community in David Perel's naked brands concept and articulating authentic online positioning. | |
| Venture Firm Marketing: High-Frequency vs. Seismic-Impact Branding | 7 | 4 | 1 | 3 | The host demonstrates strong industry mastery by categorizing venture branding into high-frequency versus infrequent seismic impact, citing Bill Gurley, Ravi Gupta, and Pat Grady. The guest agrees and notes that marketing gravity has shifted to individuals. | |
| Genuine Community-First Models vs. Afterthought Scout Networks | 5 | 6 | 2 | 3 | The host asks why venture firm community initiatives fail and probes whether YC has retained centralized market power under Garry Tan. The guest explains that secondary scout networks dilute quality when treated as afterthoughts compared to core products. | |
| The 'Blackstone of Innovation' and the Risks of Portfolio Abstraction | 5 | 7 | 3 | 3 | The guest elaborates on the Blackstone of Innovation thesis, drawing parallels between Schwarzman's institutional scale and Andreessen's multi-stage platform. The host presses on whether this dynamic is healthy for the broader startup ecosystem. | |
| The Pitfalls of Excess Capital & Post-Correction Founder Storytelling | 7 | 5 | 2 | 4 | The host articulates sophisticated LP allocation mechanics, explaining why institutional check sizes make raising $2B easier than $200M. The guest agrees and explains how excess capital covers operational flaws and alters post-correction founder narratives. | |
| Venture Math Realities & Mutual Confessions from the Boom Period | 6 | 6 | 3 | 6 | The host forces absolute candor by admitting he lost price sensitivity and pacing discipline during the boom, directly asking if the guest did as well. The guest admits his past modeling errors and breaks down the back-of-the-envelope venture math founders ignore. | |
| Quick-Fire Session: Recommendations, Misses, Hits, and the Pave Investment | 6 | 6 | 1 | 3 | In a rapid-fire session, the guest shares personal book recommendations, notable missed investments like Coinbase, and hit deals like TeamShares. The host drills into the data entry mechanism for the guest's investment in Pave, and the guest explains the give-to-get model. |
Statements from this episode (23)
Harrison: A great founder cannot overcome a bad market
“If a good manager meets a bad business, it's the reputation of the business that remains intact. I think the same way about a market. If a really good founder goes and tackles a really crappy market, that market's still going to be crappy.”
Stebbings: Claiming "nobody knows what they're doing" in business is bullshit
“You know one of the biggest bits of bullshit advice I think there is, which is like, oh, don't worry, no one really knows what they're doing. To me, this is complete crap. People do know what they're doing, which is why they're often where they are, and you sh…”
Harrison: Over 80% of venture capital funds are substandard
“Probably 80% plus of venture funds are not great.”
Harrison: Venture fund economic models will crumble under market pressures
“Like there are economic models that are going to crumble under the pressure of the market that we're going into now.”
Harrison: Venture capital firms' primary competitive moat is brand
“As VCs, we invest in these firms that have durable competitive modes when venture firms have, it's largely brand, right? It's largely that, that Competitive advantage that comes from a brand.”
Stebbings: Benchmark's ability to win founder deals is unparalleled
“Benchmark in particular are phenomenal. I'm sure you know a phenomenal list. When they all want to win a deal, their circulation around a founder and their convincing is unparalleled.”
Harrison: The failure rate of venture capital funds will accelerate
“So maybe it took multiple decades for a firm to die in the sixties and seventies and whatever eighties, maybe it took it, maybe it's taking a decade, you know, nowadays or last few years, I think that that pace is going to increase. Like information gets disse…”
Stebbings: LPs feel obligated to reinvest in funds that return 3x
“When people send cash back, they feel obligated to then return cash back for the next funds. It's very difficult for the LP to be fair on them. To get three X funds returned, and then go, thanks Kyle, not coming back for the new one. It's very hard to do.”
Stebbings: LP allocators lack carry alignment because they are salaried
“The reason for this is LP incentive structures. They're largely salaried and bonused, and they're not really aligned in terms of carry and performance based.”
Harrison: No venture firm maintains ongoing relevance with founders
“Candidly, I don't know that anybody is doing that well.”
Harrison: VC branding power has shifted to individual investors
“I think that the center of gravity has shifted to your point, largely to the individual investors. And I think there's very few firms that have kept up with that shift in the center of gravity.”
Harrison: Andreessen Horowitz actively recruits individuals with large Twitter followings
“I think it's one of the reasons why you know, anybody with a Reasonably sized Twitter following probably gets a at least job interest, if not a job offer from Andreessen, right? Like they recognize that sort of micro celebrity appeal of being able to hire anyb…”
Harrison: Andreessen Horowitz's executive Slack channels fail as genuine communities
“Some examples of this, even like Andreessen has some of these where they have like, you know, Slack channels where they'll take the CROs of all their companies and dump them into Slack channel. It's not a good community. It's an attempt at trying to like coale…”
Harrison: Venture capital scout networks will see progressive dilution in quality
“I think that you're going to see a lot of dilution in the value and quality of those scout networks progressively over time.”
Stebbings: Y Combinator cutting batch sizes signals renewed long-term strength
“I think this is like the biggest sign of strength from YC, and I was worried about them for a while. Now I'm like, fucking buy YC long hold.”
Harrison: Andreessen Horowitz most closely resembles Blackstone in venture capital
“And I think that the firm that closely, most closely resembles that in venture is Andreessen. You know, the way that they have approached things like you know, gaming and crypto and biotech and so like that, but that's sort of them saying, hey, we have this fu…”
Harrison: Abstracting venture capital into pure portfolio construction causes startup breaking points
“At some point, if that abstraction gets so far removed from this sort of fundamental company building aspect, I think that you start to get into some dangerous territory. Cause I mean, when those companies fail, when they get tons of capital and all this thing…”
Stebbings: Raising a $2B fund is easier than raising $200M
“It gets to a stage with also fund sizes, Kyle, where it's almost easier to raise two billion than it is two hundred million, and the reason I say that is because there is a pool of LPs, as you know, the pension funds of the world, Who need to move a hundred mi…”
Harrison: Excess capital will remain in venture capital despite market correction
“I don't think that people are just going to say, oh, nevermind. Venture is actually not that great of an asset class, you know, back to bonds and real estate. Like, I think that people recognize that there are still large outcomes to be had here. And so there'…”
Harrison: Venture capitalists are avoiding self-criticism following the market crash
“I thought that it would be more humbling for more people I think that there's been this sort of, like, suspension of criticism. Like, people are desperately trying to avoid having to come to grips with what they did, basically, like, with what a lot of people …”
Harrison: Only 200 to 300 startups in history have reached $1B revenue
“How many of them have scaled to over a billion dollars of revenue, like 203 hundred or something, right? Like it's a tiny fraction of companies that have truly gotten to that massive Scale.”
Harrison: Outlier startups grow via steady 30-40% compounding, not perpetual hypergrowth
“When you look at those companies that have sort of defied gravity, they almost never do it in these explosive nonlinear paths. They're just compounders. Like very quickly, they get to that sort of, you know, maybe 30, 40% growth, and then they just crush it fo…”