The Power Law Has Gone Fractal
I’ve been digging through the new SVB State of the Markets report (always worth the time), and some of the data really stood out. We talk a lot about the Power Law in venture – a few big winners carry the fund. That’s not new.
What is new is how extreme it’s become. The data suggests an aggressive shift: we’re in the age of the Super Power Law now.
Here are four points I found most interesting:
1. The “1% Economy”
In 2025, the top 1% of venture deals absorbed ~33% of all capital invested.
The bottom 50% of companies split just 7%.
That’s way beyond “concentration.” That’s a market split in two.
- The Mega-Game: ~24 companies raising $1B+ rounds (largely AI infrastructure).
- The Real Game: Everyone else.
Both are called “venture,” but they’re operating under totally different physics.
2. A Category Error: SaaS = AI
A lot of this distortion comes from treating AI like a faster version of SaaS. It isn’t.
For 15 years, the SaaS playbook worked: Capital efficiency. High gross margins. Predictable scaling.
We used to fund code. Now we fund GPUs.
AI breaks the model. CapEx matters again. Balance sheets matter again.
The top handful of private AI companies may end up worth more than the entire dot-com IPO class combined.
If you try to play the trillion-dollar AI game with a SaaS budget, you lose.
If you try to run a SaaS business with AI-era burn expectations, you also lose.
3. The “Graduation” Trap
For the 99% of founders playing the Real Game, the bar has changed dramatically.
According to the report, the median revenue jump needed to go from Seed to Series A is now 11.3x. Not 2–3x.
At the same time, founders are being told to raise less, burn less, and somehow get there faster. It’s brutal.
4. The Silver Lining?
Sanity is returning.
As SVB’s Eli Oftedal pointed out to me, early-stage founders who have focused on efficiency for the last four years are starting to return to burn and are seeing growth improve as a result. The median Series A company is on track to increase burn after closing their round similarly to 2019 Series A raises.
Among the largest companies, the focus is still squarely on profitability. At the late stage (>$200M revenue), median profit margins have finally gone positive.
After years of “growth at all costs,” financial gravity is back.
My Advice for Founders
There’s a lot of noise right now about $15B funds and $5B rounds. For most founders, that’s a distraction.
Don’t let the Super Power Law distort your reality. The playbook of the 1% shouldn’t dictate what makes sense for the 99%.
The data suggests that durable, capital-disciplined businesses – the unsexy ones that can actually turn a profit – are the ones making it through the gap.
Big thanks to the SVB team for putting numbers behind what we’re all feeling. Essential reading.
