Scale in venture is a pyramid: the market for access is so narrow that a top-5-tier fund that misses the $3 trillion companies becomes 'much harder to sell,' and because fewer than 100 companies created in the last 25 years are sustainably over $10 billion, a seed fund only needs ~5% of one ~$2.6 billion company to return its fund.
David explains the 'pyramid' narrowing of venture — the biggest firms must be in the $3T-plus companies to keep selling access — and why a 5% stake in a median $2.6B winner (careers' few $10B+ companies) can return a seed fund; spotting such founders is 'code for this may just be another Uber, another Suno.' ✦ AI generated
David Frankel · 20VC · 2026-08-08 · original ↗
starts at this moment · 3:08
“Why am I wrong? And why will this vintage be great for those funds?”
you've got this narrowing out in venture where the bigger you get almost like it becomes like a pyramid... if you miss the $3 trillion companies, right, like you're much harder to sell... if you look at the numbers over the last 25 years of how many companies were created that are over hundred billion dollars and the numbers are like there were less than a hundred companies over the last 25 years, less than a hundred that are sustainably over 10 billion companies. So you've at that top end, you've got to be in that. The median company... the median of the top 500 companies created in the last 25 years, the median is 2.6 billion. Now, if you own 5% of one of those companies, you return the fund each time... you can wait and wait and wait and wait if you're patient and then you just see someone... you see a founder or you see a team and you just go, I have to be there, right? And to me, that's code for this may just be another Uber, another Suno, another Shield AI.
verbatim transcript · starts at 3:08
3:08Funds and all they're doing is selling access and they're they're fine with it. And if the you name it, top 10, top five names are not in XYZ great company and I would say at this point if you're not like in the top five, if you miss the at a certain level, if you miss the $3 trillion companies, right, like you're much harder to sell, right? And so so
3:34it's not trillion dollar robust, but like if you look at the numbers over the last 25 years of how many companies were created that are over hundred billion dollars and the numbers are like there were less than a hundred companies over the last 25 years, less than a hundred that are sustainably over 10 billion companies. So you've at that top end, you've got to be in that. The median
3:59company, we've done a lot of work on this very recently, but the median of the top 500 companies created in the last 25 years, the median is 2.6 billion. Now, if you own 5% of one of those companies, you return the fund each time. And I would say what's gone on in seed is like there are whole bunch of unreasonable bets being taken with loads of funds and loads of money. And
4:25you know, it's quick, right? because you know you've got to get the check in because you got to get to the next fund. It's so it's incredibly tough at seed. What's what makes this still a great business is it's a little bit of what I said about you is you can wait and wait and wait and wait if you're patient and then you just see someone, right? You
4:45see a founder or you see a team and you just go, I have to be there, right? And to me, that's code for this may just be another Uber, another Suno, another Shield AI. And I think a little bit, I'm I'm answering this personally, a little bit of this is a drug, right? Is like, you know, finding Harry. Finding that is a bit of a drug. So I, you know,
5:09addicted if that's the case. And I think that that if you're in early, um, you still have a chance of returning a fund. I think it's a to it's a totally different business. And by the way, do you have to be the full $8 million? Definitely not. We can't be. Can you write a $3 million check? Can you write a half a million check? Now, valuations, uncapped notes, that's changing the
5:34business. But you don't just have to do that. So if you're if you're on pie and I would say if you're on pie for the last I've been doing this for 18 years nearly is it was always expensive. It was always tough but you find some of the best people off pie always. Can I ask you on those rounds when you look at the 8 to 10 million rounds or