The Twenty Minute VCKyle Harrison: Why 75% of Active Investors Will Disappear in the Next Few Years | 20VC #940
CHAPTERS
- 0:00 – 2:38
From filmmaking to venture: Kyle’s circuitous path to Contrary
Kyle shares how he went from studying filmmaking and producing videos to accidentally building and selling a “creator marketplace” in Utah. That experience—being a resource to ambitious builders—became his gateway into venture and ultimately to becoming a GP at Contrary.
- •Started in filmmaking; funded school through video work
- •Scaled client work by farming projects out to other creatives (early marketplace dynamics)
- •Sold the business and learned what he loved most: helping operators win
- •First formal venture exposure at Utah seed fund KickStart
- •Moved to the Bay Area and landed at TCV, Coatue, Index before joining Contrary
- 2:38 – 8:15
Three formative firm lessons: TCV’s work ethic, Coatue’s market obsession, Index’s craft mindset
In a rapid-fire tour of prior roles, Kyle explains the distinct investing “schools” he experienced. He highlights TCV’s hands-on investor posture, Coatue’s focus on market size (TAM arbitrage), and Index’s emphasis on studying venture as a discipline.
- •TCV: investors should ‘do the work’ and proactively help founders
- •Coatue: ‘TAM arbitrage’—outwork others to see a market’s true size earlier
- •Markets can enable higher prices, faster growth, and more experimentation
- •Index: felt like ‘graduate school’—watching decision-making and incentives closely
- •Core takeaway: venture performance improves when the craft is deliberately studied
- 8:15 – 9:26
Debunking ‘nobody knows what they’re doing’: excellence comes from study and feedback loops
Harry challenges the common venture trope that outcomes are mostly luck and no one really knows what they’re doing. Kyle argues the best investors and firms improve systematically by learning from mistakes, doing postmortems, and iterating on their process.
- •People act deliberately; the real gap is skill and learning velocity
- •The trope often serves to soften the blow of being wrong
- •Exceptional investors improve through study, attention, and repetition
- •Postmortems and process design are underused advantages
- •Treating venture as a craft separates enduring performers from mediocrity
- 9:26 – 10:52
Why 50–75% of active investors may disappear: differentiation and the ‘so-so firm’ problem
Kyle unpacks the prediction that a majority of private-market investors could vanish in the next few years. As founders care more about the identity and distinct value of capital partners, undifferentiated, average firms will struggle to win deals and justify their existence.
- •Prediction: 50–75% of active investors could disappear in coming years
- •Founders increasingly evaluate ‘holistic character’ of investing institutions
- •Differentiation = outsiders can clearly articulate what you uniquely are
- •As choice increases, ‘reputable bank’ style branding becomes insufficient
- •The long tail of average firms gets squeezed as distinctiveness becomes table stakes
- 10:52 – 13:31
The unbundling of venture: monolithic brands → internal fiefdoms → partner-led renegades
Harry and Kyle discuss how power has shifted from firm brands to individual partners. Kyle maps venture’s evolution from institution-first identity, to specialty ‘fiefdoms’ inside firms, to today’s era where personal brand and unique models drive attention and deal access.
- •Phase 1: monolithic institutions (e.g., classic Sequoia/Kleiner era)
- •Phase 2: fiefdoms within firms (e.g., specialized arms like crypto)
- •Phase 3: ‘renegades’—individuals and models that stand apart
- •Personal brand becomes a primary interface for founders choosing capital
- •Differentiation can be as simple as an authentic, consistent investor ‘vibe’
- 13:31 – 17:55
What makes a venture firm ‘so-so’: performance, culture, and brand under stress
Kyle defines mediocrity in venture across three buckets: economic performance, internal culture, and external brand. He argues bull markets hide poor behavior and weak models, but corrections expose firms that can’t deliver returns, operate cohesively, or behave well when capital tightens.
- •Most funds may be subpar; it’s just slow to identify which ones
- •Economic performance is non-negotiable (performance then teamwork)
- •Culture can quietly destroy even ‘well-regarded’ firms from the inside
- •Brand is the key moat for many venture firms—and fragile in downturns
- •Corrections surface bad behavior (round blocking, survival-jeopardizing terms)
- 17:55 – 23:22
Why funds die slowly: LP loyalty, inertia, and incentive misalignment
Harry argues that mediocre firms can survive for years due to delayed feedback loops and legacy DPI from old wins. Kyle agrees and suggests the pace may still accelerate as information travels faster, but LP structures and risk aversion slow the reallocation of capital.
- •Legacy distributions can keep weak firms fundraising long after relevance fades
- •LPs feel obligated to re-up when cash is returned, even if forward outlook is poor
- •Venture is young as an industry; norms and failure modes are still forming
- •Information spreads faster, potentially increasing the ‘rate of death’
- •LP conservatism (‘same as last year’) dampens rapid change
- 23:22 – 25:18
How Kyle would allocate as a family office: disciplined diversification + community access
Kyle explains how he’d invest if he were running a family office after major fund success. He emphasizes diversification beyond traditional venture and prioritizes managers who embed themselves in high-quality communities and stay relevant across an individual’s career lifecycle.
- •Diversify across business types; not all great companies should raise venture
- •Select managers with a clear, differentiated funnel and edge
- •Prioritize access to concentrated ‘pockets’ of exceptional people
- •Focus on relationship compounding across a person’s lifecycle, not one-off sourcing
- •Build mechanisms to engage talent before they become founders
- 25:18 – 31:24
What ‘community’ really means in venture: authenticity, relevance, and product-level focus
Pressed to define fuzzy terms like community and relationships, Kyle frames the shift toward empathetic, person-led trust online. He argues most firms’ community efforts fail because they’re afterthoughts meant to drive deal flow, rather than a core product designed for members.
- •Internet-era trust shifts from institutions to people founders can empathize with
- •‘Jobs-to-be-done’ framing: founders hire investors for specific needs and fit
- •Online presence can create sincerity and magnetism—if it’s authentic
- •Many ‘communities’ are just Slack buckets; they don’t create real belonging
- •Communities work when member experience is the core product, not a side channel
- 31:24 – 35:07
Y Combinator’s compounding advantage—and why most firms can’t replicate it
Kyle and Harry highlight YC as a rare example of a generational community with compounding benefits. Even if individual experiences can dilute with scale, YC’s network effects and enduring affiliation keep strengthening its gravitational pull.
- •YC built a once-in-a-generation community with durable affiliation
- •Batch scaling can dilute individual experience, but exposure to talent remains high
- •Compounding comes from expansiveness and ongoing involvement in founder journeys
- •YC’s renewed focus (smaller batches, leadership changes) signals strength
- •Most venture firms haven’t matched YC’s lifecycle-long relevance
- 35:07 – 43:05
The ‘Blackstone of venture’: Andreessen-style platforms and the dangers of macro abstraction
Kyle describes a ‘Blackstone’ model applied to venture: an infrastructure that can spin up strategies across categories by plugging in specialized leaders. He worries that extreme portfolio abstraction can detach decision-making from the human realities of company-building, amplifying harm when bets fail.
- •Blackstone scaled by mastering ‘80% infrastructure’ and hiring ‘20% secret sauce’ leaders
- •Andreessen resembles this: strong brand/capital machine + expanding strategy pods
- •Platform funds can accept lower return thresholds if capital is sticky
- •Macro portfolio allocation mindset can conflict with micro realities of building companies
- •Failures are a ‘blip’ for AUM but life-changing for employees and founders
- 43:05 – 47:38
Post-correction reality: weaker accountability, better founder storytelling, and valuation confusion
Kyle outlines the biggest shifts after the market correction: surprisingly little public reflection, more pressure on founders to explain fundamentals, and widespread uncertainty on what prices should be. He also notes resistance to down rounds in the Series A–C zone despite changed public comps.
- •Trend 1: ‘suspension of criticism’—little mea culpa after the boom
- •Trend 2: founders focus more on articulating fundamentals (PMF, unit economics, market)
- •Pricing is chaotic; many investors and founders don’t know the new anchors
- •Down rounds remain psychologically resisted outside late-stage recap situations
- •Basic venture math and public-market multiple reality checks are returning
- 47:38 – 50:18
Boom-era mistakes: investing too fast, losing price sensitivity, and underestimating gravity
Harry admits he moved too quickly and lost price discipline; Kyle agrees partially but focuses on a deeper error: treating extreme growth outcomes as a reasonable base case. He argues truly massive companies are rare and usually succeed through compounding engines, not perpetual nonlinear explosions.
- •Investing speed increased at times, but the bigger issue was optimism about scale
- •Models often assumed $1B+ revenue in 4–5 years as a ‘base case’—an unrealistic bar
- •Very few startups ever reach $1B revenue; gravity is real
- •Most category leaders are sustained compounders, not endlessly exponential curves
- •Future diligence should benchmark against real historical scaling paths
- 50:18 – 1:00:38
Quickfire: books, underrated angels, misses/hits, outlook, and a recent investment (Pave)
In the closing quickfire, Kyle shares influences and investing scars: a favorite book about knowledge networks, an underrated angel, and lessons from passing on Coinbase and backing TeamShares. He predicts the growth market improves as valuation expectations normalize and ends with why he’s excited about Pave’s compensation data platform and its give-to-get data strategy.
- •Favorite book: *Reinventing Knowledge* and the ‘Republic of Letters 2.0’ idea
- •Underrated angel: Amjad Masad (Replit) for ambition and perspective
- •Biggest miss: passed on Coinbase—failure to imagine a massive user behavior shift
- •Biggest hit: TeamShares—conviction in a ‘laughable’ idea executed well
- •Recent investment: Pave—compensation data layer with benchmarking via give-to-get HRIS/cap table integrations
