Why Venture Capital LPs Should Fund Flying Cars
In 2011, Peter Thiel gave Venture Capital one of its most memorable complaints: “We wanted flying cars, instead we got 140 characters.”
Thiel was attacking an industry that had drifted away from its daring company-building roots. Instead, Investors had become good at pattern matching: recognizing companies that looked like previous winners, joining fashionable rounds, and asking who else was investing. As the asset class grew, most VCs became money managers.
In short, they focused on capital instead of venture.
I believe that we’re now closer to funding “flying cars” again, a metaphor for bold innovations carried by mission-driven Founders backed by visionary VCs.
Since the 2022 reset, Venture Capital has split into two distinct segments. On one side, large platforms compete for big LP commitments and concentrate capital in the most obvious winners. On the other, smaller firms (including Emerging Managers) fight to prove they can identify the next outlier before the rest of the market agrees.
But size is not the real distinction. Some large firms still make bold, early, non-consensus bets, while some small funds merely copy fashionable themes with less capital. The deeper divide is in the mindset. It separates promotion-focused Investors, who focus on what can go right, from prevention-focused Investors, who strive to avoid being wrong.
That distinction matters most for allocators in VC funds (Limited Partners or LPs).
LPs aiming for superior returns should back VC managers investing in flying cars. Risk and illiquidity are so high in VC that only top-quartile, and even top-decile performance makes financial sense.
However, there’s a catch. Instead of requiring VC managers to shorten the liquidity horizon, LPs should recognize that it takes time to build category-defining companies. They must mirror the mindset of GPs with sufficient risk appetite and patience to make bold bets — or stay out of the asset class altogether.
In this article, I show how the current environment favors promotion-focused Investors, those who are mentally equipped to make conviction-oriented, pre-consensus investment decisions, and how LPs can discern them from the pack.
It’s time to start building those flying cars.
