Mercenary Capital vs. Mercenary Equity: The Death of the Venture Social Contract

VC used to be a marriage between an investor and a founder. Now, for some, it’s a series of one-night stands.

I’ve spent 30+ years building and backing companies, and it’s never felt quite like this.

Loyalty seems to be at an all-time low in venture right now. Everyone feels a bit more transactional. A bit more short-term. A bit more… mercenary.

I hope it’s just Gold Rush behavior. But I’ve been watching this closely over the past ~18 months, and it feels like something deeper may be shifting.

I’m starting to wonder if the social contract in venture is eroding on both sides of the table.

The End of the VC “Decade Commitment”

Historically, being a partner at a venture firm was a long game. You made investments, sat on boards for years (sometimes a decade+), and lived with the outcomes.

Today, there’s a lot more movement. People are leaving to start firms, spin out funds, etc. I’m seeing more transition of Board Members, more switching of folks at VC firms, or funds that are quickly and frequently changing strategies.

The 18-Month Founder Experiment

But it’s not just VCs. Founders are behaving differently too.

More and more, startups feel like 12-18 month experiments. If it doesn’t hit quickly, people move on.

Less loyalty to the original idea. Less loyalty to co-founders and teams (more founder acquihires). Less loyalty to the investors who took the early risk.

I’m seeing more founders with 2-3 companies behind them in just a few years.

Credentials > Commitment

In a more transactional ecosystem, credentials seem to matter more than continuity in that as long as you have a top school, top tech company, or top accelerator on your resume, you can keep trying even if you abandon your team for the next shiny object.

Perhaps that’s actually a virtue of our entrepreneurial economy – as long as you’ve proven your potential, you have the freedom to chart a new path at any time.

Maybe that’s efficient. Maybe it’s rational.

But it sacrifices the depth of passion, conviction, and camaraderie that makes our industry so special.

When mercenary capital meets mercenary equity, fewer people behave like long-term owners.

Maybe it’s just a Gold Rush dynamic.

Or perhaps a structural mismatch? A 10-year asset class operating in markets that now reset every 12-24 months.

Regardless, I still think there’s alpha in the opposite approach. Things often go wrong before they go right, especially at seed. One of the fund-returners from our Fund I back in 2009 struggled for years to crack a category that didn’t exist yet and was on the brink of shutting down. But the founder refused to jump ship. So did FC. That company is now the most valuable in its category.

I wonder how many founders and investors today will have similar stories 15 years from now.