Distributed VC Firms: The Next Iteration of Venture Capital

TL;DR

This paper critiques current venture capital incentive systems and proposes a novel 'distributed venture firm' model utilizing automation and team pods to better align incentives with startup asset value.

Contribution

It introduces the concept of a 'distributed venture firm' powered by automation and team pods, offering a new organizational model for venture capital.

Findings

Critiques existing VC incentive structures.

Proposes a new 'distributed VC' model with automation.

Suggests pathways for validating and implementing the model.

Abstract

Using a combination of incentive modeling and empirical meta-analyses, this paper provides a pointed critique at the incentive systems that drive venture capital firms to optimize their practices towards activities that increase General Partner utility yet are disjoint from improving the underlying asset of startup equity. We propose a "distributed venture firm" powered by software automations and governed by a set of functional teams called "Pods" that carry out specific tasks with immediate and long-term payouts given on a deal-by-deal basis. Avenues are provided for further research to validate this model and discover likely paths to implementation.