No Capital No Constraints

The MatCap Manifesto

Venture capital is structurally bad at identifying outsiders. Not because individual investors lack judgment, but because the system they operate in makes it rational to avoid them.

I first came to this conclusion in 2019. At the time, it was a hunch. After seven years of working closely with founders and investors through Seedscout and on my own, I am confident it is true. As an industry, we do not know how to evaluate talent without a pre-existing signal. Instead, we rely on credentials, networks, and third-party validation to decide who is worth backing.

For insiders, this works well. Networks propagate trust, and reputation compounds. But for outsiders, access to capital depends almost entirely on whether a tastemaker vouches for them. Those tastemakers then define the investment pool. Today, that group includes programs like YC, South Park Commons, etc.

The issue is not that these institutions make bad investments. The issue is what they are optimized for. Many tastemakers are rewarded for backing founders who are most likely to raise money later. YC will invest in idea-stage companies, but many of those founders come from Stanford, Stripe, or similarly legible backgrounds. The stage appears risky, but the outcome is often predictable. The YC machine plus founder pedigree reliably attracts downstream capital. From their perspective, this is a rational decision.

Venture capital is ultimately about pricing future capital attraction. Equity needs to be priced, and ideally repriced higher over time. That only happens through funding. At its best, venture investors invest early, set a price, and hope the company grows into that valuation and becomes a generational business. Given that objective, it makes sense to back founders who are most likely to raise again. That is the job. But this logic creates a constraint.

Today, if you work at one of the important tech companies of the moment, you can likely get introductions into Silicon Valley. If you are selected into one of the major programs, you also get access. And if you are young, unattached, and able to move to San Francisco, you can embed yourself in the ecosystem and make it work. This path functions well for a small subset of people. Most cannot take it.

What emerges is a structural bottleneck. It constrains who gets seen, who gets funded, and ultimately what kinds of companies get built. This is not just a constraint on venture capital. It is a constraint on innovation and on how successful the technology industry can be as a whole.

The root cause of this constraint is capital itself.

The size of each fund and the expectations attached to it shape investor behavior. Capital concentration incentivizes meeting a specific type of founder, someone perceived to have the right background, context, and connections to build a venture-scale company. Over time, this preference becomes self-reinforcing. Unfortunately, this often conflicts with the actual goal of generating outsized returns.

Someone I follow closely is Dan Gray, head of research at Odin. He consistently argues, with data, that alpha in venture capital comes from backing people with varied backgrounds and non-consensus ideas. These founders are often overlooked. Their companies are priced more reasonably. Their ideas differ from what typically gets funded in Silicon Valley. And as a portfolio, they create stronger diversification.

Privately, many investors agree with this. Most would, in theory, rather back an unknown founder and watch them build an empire than compete for an overpriced consensus deal. Yet in practice, behavior rarely matches belief.

These two realities exist in direct conflict. On one side, there is a monoculture where founders must fit a narrow profile to be legible. On the other, the data suggests returns improve when portfolios include more outsiders with diverse experiences and ideas. This tension explains why many fund managers struggle. More importantly, it explains why venture capital often fails to live up to its promise.

Groupthink is not an effective way to allocate risk capital. Yet it dominates the industry because it is defensible. And defensibility matters when capital is scarce and LP expectations are high.

Consider the incentives. If you have $500,000 to invest, you want that investment to count. Scarcity pushes you toward the safest possible perceived bet, even if it is objectively more risky. The same logic applies to a $5 million fund and to a $50 million fund. As long as capital is limited, access to it will be limited. And when access is limited, investors will favor insiders. Backing the proven profile is easier to justify, even if it fails, because it can be explained.

So the question becomes simple. How do you build a firm that is incentivized to spend time with outsiders, without asking LPs to take on unacceptable risk, and while still generating strong returns?

This is the problem we set out to solve with MatCap. MatCap is building CAA for startup founders. I am excited to share a bit about our model here.

Most importantly, we do not primarily invest capital. There is no shortage of investors out there. What is missing is a trusted filter from the outside in. I have spent the last five years building that trust with investors. Our model is simple: we receive equity in companies through work supporting the founders, and in exchange, we help increase their odds of success by providing context and guidance on how to get started. By acting as an organizing function rather than a capital allocator, we are not constrained by an arbitrary fund size. We can operate with far less capital than a traditional fund. In fact, we launched the entire operation with a single check from an investor who also backed Seedscout.

This model will take time for the industry to fully accept. Founders are accustomed to giving up equity in exchange for capital, not help. Investors are wary of non-employees and non-investors appearing on cap tables. But over time, as value is delivered, the limitations of the current system become harder to ignore, and this model will likely become more popular.

By removing fund size as a constraint, we gain scale. We can get thousands of founders into our system, get reasonable ownership, work with all of them, and benefit from diversification unlike anything most funds can realistically achieve. In this structure, we can take many flyers on people with unknown backgrounds. We will be wrong often, but as long as a meaningful percentage of founders have “the stuff,” this system works. Venture capital has become very good at the capital part of risk capital. We believe our structure allows us to support the risk and the return that comes with it.

Working alongside traditional firms, not in place of them, we can help enable more companies that would otherwise be overlooked due to a lack of context or access to VCs. Companies that generate stronger returns, build more durable businesses, and create broader prosperity.

We are not trying to replace venture firms. We are adding a missing layer, one that accelerators were meant to provide but cannot structurally deliver at the scale required to make a meaningful difference. Without investing capital, there is no constraint on how many founders we can help.