For a long time, smaller venture funds leaned on the same advantages: speed, flexibility and deep sector expertise. Conventional wisdom held that while big firms moved slowly, smaller ones could act swiftly, write early checks and provide highly targeted support in a narrow space.
That story no longer holds up.
Big funds have learned to play small
The largest firms now look less like monolithic institutions and more like multidisciplinary studios. They hire domain-specific advisers, create sector-focused practice groups, and develop detailed post-investment playbooks, offering the same “tailored” value propositions that once distinguished niche funds, and with more resources.
The numbers underline the tilt. In 2024, 30 funds captured close to 75% of all venture dollars. Researchers also found that 74% of persistent VC success comes from better deal flow after early wins. Once a firm builds credibility, it gets preferential access to the most promising startups, and the cycle reinforces itself.
Why early access matters more than expertise
Money looks the same to every founder. Expertise can be purchased — whether through consultants, advisory boards or strategic hires. What cannot be replicated is the trust built before a round becomes competitive.
That is where smaller funds still have an opening. The real advantage is not expertise but access — specifically, early access. By the time a startup is widely circulating its deck, the outcome already favors whoever has been in the room with the founder from the get-go.
One clear example is Initialized Capital’s early bet on Coinbase. In 2012, out of a $7 million debut fund, the firm wrote a $300,000 check into the crypto exchange’s seed round, when most investors dismissed the sector as fringe. By the time of its IPO in 2021, that stake was worth $2.4 billion. What set Initialized apart was being in the room early before the deal became obvious.
What successful small funds are doing differently
Some smaller funds are already adapting. They no longer think of themselves as check-writers waiting for polished pieces. Instead, they operate as active participants in a founder’s journey well before the company raises institutional capital.
That shift shows up in specific behaviors. Smaller funds are mapping relationships with accelerators, angels and operators months ahead of a raise. They spend time in communities where founders are still testing ideas. They make introductions — to customers, hires and partners — at a moment when those introductions can change a company’s trajectory.
They also mobilize their portfolios. Founders are often the best scouts, and funds that cultivate reciprocal relationships expand their reach in a way no spreadsheet of leads can.
Even in competitive areas like AI or biotech, smaller funds can differentiate by serving as a bridge to strategic players. A warm introduction to Nvidia, Microsoft or a top-tier research lab validates a startup long before an institutional round is announced. These are the kinds of moves that earn trust before the larger firms even notice the opportunity.
The mindset shift
What it comes down to is mindset. Smaller funds can no longer think of themselves as investors selling capital. They need to act as nodes in a network: connecting earlier, engaging more personally, and maintaining persistence long after a term sheet is signed.
In today’s market, competition for quality deals has never been fiercer. The firms that succeed won’t be the ones who claim they are faster or more specialized. They will be the ones who build trust before capital is even on the table.
Smaller funds can still win, but only by rewriting the playbook altogether.
Andrew Gershfeld is a general partner at Flint Capital, a VC firm investing in early-stage startups in AI, cybersecurity and digital health, and helping them expand into the U.S. market.
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