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TGIF. There’s been a lot of noise in the venture capital space in the last decade. Some good, some bad. Today, I’ll explore the evolution of the venture capital industry and discuss how capital and culture have become increasingly intertwined.
Venture capital has long been a critical force in shaping technological and cultural evolution. The model emerged in the mid-20th century, and gained traction by financing high-risk, high-reward startups in “far out” industries like semiconductors, personal computing, and the internet. The fundamental principle of venture investing - placing strategic bets on founders and ideas that have the potential to reshape the world - has remained unchanged. However, the scope of what constitutes a “venture scalable” opportunity, and the sources of capital for investing in said opportunities, have evolved.
A brief history of the asset class:
Early 1900s - Well before the existence of the institutional VC industry as we know it today, wealthy individuals and business magnates such as J.P. Morgan and the Rockefeller family invested high-risk capital to fuel industrial innovation in the railroad and steel industries. These private financings they laid the groundwork for what was to come.
1946 - Harvard Business School professor Georges Doriot founded American Research and Development Corporation (ARDC), the first VC firm, which made early bets on tech companies like Digital Equipment Corporation.
1960s - Prominent firms Kleiner Perkins and Sequoia Capital emerged, fueled by the growth of the Silicon Valley tech industry and the relaxing of pension fund restrictions which created an influx of capital into the aforementioned firms.
1990s - VC became a household name during the dot com boom. Firms aggressively funded internet technology startups like Cisco, Microsoft, Apple and Amazon.
Mid 2000s - Venture funding rebounded after the dot com bubble burst, with a focus on mobile, social media, and software companies. This era gave rise to companies like Uber, Facebook and Airbnb.
2020 - During a period of near-zero interest rates, the venture industry ballooned into an industry that more closely resembles the high AUM and low touch asset management business. Early-stage funding flowed abundantly, private market valuations of early and growth stage companies seemed to only go up, and firms raised larger funds.
Today - There is a great bifurcation in the venture industry. On one side, there are smaller, more artisanal firms managing <$500m funds. On the other, the “mega firms” like Sequoia, General Catalyst and Andreessen Horowitz have raised and are currently deploying >$1b funds, again more closely resembling a fee-driven asset management business than the scrappy, risk-taking entities which were once prevalent.
Historically, venture capitalists have prioritized sectors with scalable business models, often overlooking cultural movements and creative industries. But culture, too, can be an investable asset. Music, fashion, art, and social movements all generate significant economic value, influencing consumer behavior and driving entire markets. The challenge has always been that investing in culture often lacks the traditional return models and predictable TAM calculations that underpin traditional technology investments.
Enter on-chain investment vehicles and decentralized autonomous organizations (DAOs). These blockchain-native structures have introduced new mechanisms for capital formation, allowing individuals to pool resources and make collective investment decisions in a trust-minimized environment. Investment DAOs, in particular, have emerged as a novel approach to early-stage investing, democratizing access to deal flow and decision-making in ways that traditional VC has struggled to achieve.
The mechanics of investment DAOs are relatively simple but powerful. Members contribute funds in exchange for governance rights, usually represented by a token. Proposals for investments are submitted and voted on, with capital deployed based on the collective will of the group. Smart contracts ensure transparency and automation, reducing administrative overhead and aligning incentives across participants.
However, these structures are not without their shortcomings. Investment DAOs often struggle with regulatory uncertainty, coordination challenges, and adverse selection. The absence of clear legal frameworks can make it difficult for DAOs to secure equity stakes in startups, limiting their ability to participate in traditional cap tables. Additionally, decision-making by consensus can be slow and inefficient, favoring hype-driven investments over rigorous due diligence. Many DAOs also attract participants with varying levels of investment expertise, leading to inconsistent portfolio performance.
Despite these limitations, on-chain capital formation presents an intriguing new frontier for cultural investments. By enabling direct participation from communities, these models align financial backing with cultural movements, allowing fans, creators, and early adopters to share in the upside of projects they believe in. This approach differs from conventional venture investing, where financial interests often precede cultural considerations.
Investing in early-stage technology and Web3 companies requires a fundamentally different lens than traditional startup investing. Web3-native startups often operate in emergent or undefined markets, making it difficult to evaluate TAM in conventional terms. Rather than relying on established market sizing techniques, investors must assess cultural momentum, network effects, and the potential for user-driven adoption.
Take NFT projects as an example. The early success of collections like Bored Ape Yacht Club wasn’t driven by traditional business fundamentals but by their ability to capture cultural relevance and create a high-status social club. Similarly, early Web3 social platforms and decentralized creator economies thrive on community participation rather than predefined revenue streams. In these cases, investing isn’t just about calculating future earnings but about recognizing shifts in digital ownership, identity, and behavior.
This challenges investors to rethink their frameworks. Instead of assessing TAM through revenue projections alone, cultural investors must analyze trends in media consumption, online and offline social behaviors, and shifts in creative production. An emerging artist or event series may not seem like an obvious billion-dollar market, but if it taps into an underserved cultural demand, it can scale in ways that traditional metrics fail to capture.
As cultural capital becomes more quantifiable, new models for investing in early-stage creative economies will emerge. Hybrid investment models - where traditional venture principles intersect with Web3-native funding mechanisms - could provide the best of both worlds, combining strategic capital allocation with community-driven value creation. We may see a future where cultural investment vehicles blend equity ownership, token incentives, and collective governance to fund everything from underground music movements to decentralized media networks.
Ultimately, early-stage investing is a bet on how the world will change. Culture has always been a leading indicator of economic shifts, even if traditional finance has been slow to recognize it. As new capital formation models arise, investors who understand the interplay between culture and capital will be best positioned to identify - and fund - the next wave of transformative businesses and cultural movements.
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