🔥More Shots on Goal: How AI… | Data Driven VC Summary

1. Key Themes

The Seed-to-Series A funnel has structurally broken

Graduation rates have collapsed from historic norms to roughly a fifth of companies, forcing a fundamental rebuild of fund models.

"Most seed fund models still assume that roughly half of your companies raise a Series A. The current number is closer to a fifth." "The 2024 cohort is young and will drift up, so treat 16% as a floor rather than a finding."

AI is replaying the "spray and pray" dynamic from the cloud-computing era

When capital costs of starting companies collapse, VCs historically respond by making more, smaller, less-governed bets — and this pattern is repeating with larger amplitude.

"Their finding, in their own words, was an increased prevalence of a 'spray and pray' approach, where investors provide a little funding and limited governance to an increased number of startups that they are more likely to abandon..." "Smaller cheques, more companies, more abandonment. That is the conclusion of this essay, already documented for a smaller shock a decade ago." "AI is the same shock with a larger amplitude."

The bar for graduating has risen even as the funnel widens

Both entry volume and the revenue/spend threshold required to raise a Series A have gone up simultaneously — a squeeze from both directions.

"The median seed round tripled since 2018 to roughly $3M, the time between Seed and Series A doubled to more than two years, and the revenue bar more than doubled from about $1M ARR to $2-4M ARR." "SVB's 30th State of the Markets puts the Series A burn multiple for AI companies at 5.0x against 3.6x for non-AI, so the median Series A AI company spends about $5 to add $1 of new revenue."

Portfolio construction must shift toward more entries, smaller checks, and concentrated reserves

The math shows that keeping old fund structures under new graduation rates leaves reserves stranded and misallocated.

"The response the evidence supports is more entries, smaller cheques, a reserve ratio nearer 30% than 50%, and follow-on capital concentrated into two or three names." "Model B holds more than five times the capital that its own pro rata rights can take up." "That capital has three places to go. Super pro rata at Series A prices, where your seed-stage edge is already spent. Bridge rounds into companies that missed the bar. Or nowhere at all. All three are worse than having deployed it at entry."

2. Contrarian Perspectives

Smaller ownership stakes may not matter if outlier outcomes are large enough. The conventional objection — that smaller checks buy less ownership and thus smaller returns — is challenged by the scale of modern outlier outcomes.

"That objection is weaker than it looks, because the outcome is not fixed at €2B. The fifty most valuable private companies were worth a combined $5.1T in September 2026." "Outlier outcomes have increased more than dilution-adjusted shareholding at exit has decreased. Said differently, you can afford lower initial shareholding if the likelihood adjusted outcome can be big enough."

Bigger funds are not the answer to needing more shots on goal — more entries at the same fund size is. This runs against the instinct to raise larger funds to support broader portfolios.

"Kaplan and Schoar found the relation between fund size and performance concave, and that a GP raising a larger fund posts weaker returns than their prior one." "Width comes from more entries, not a bigger fund... Raising €200M so you can write 40 cheques at the old size is the move that finding warns against."

Disciplined firms adapting to this shift will look worse in the near term, not better. Doing the "right" thing under this new model is likely to be misread by the market initially.

"The firms that get this right will look undisciplined for about two years. Then their entry cohorts will start clearing, and the arithmetic will look obvious in hindsight."

3. Companies Identified

Affinity — CRM/relationship intelligence platform for VCs. Mentioned as sponsor and source of an industry benchmark report on sourcing/networking behavior across VC firms.

"Affinity analyzed platform activity from nearly 3,000 VCs firms to reveal how the industry sources, networks, and closes." "The 2026 Venture Capital Benchmark Report covers the activation gap (firms convert just 38% of relationships into intros), key-person concentration risk, and quartile benchmarks across every metric."

(Note: No operating startups are highlighted as case studies in this piece — the article is data/model-driven rather than company-driven. Data providers referenced as sources include Crunchbase, Carta, SVB, Correlation Ventures, and Multiples.vc.)

4. People Identified

Andre Retterath — Author of Data Driven VC newsletter. Wrote and structured the entire fund-model analysis presented in this piece.

"Stay driven, Andre"

Ewens, Nanda and Rhodes-Kropf — Academic researchers (Journal of Financial Economics, 2018). Cited for foundational research documenting VC's "spray and pray" response to falling startup costs during the cloud computing shift.

"Ewens, Nanda and Rhodes-Kropf documented what venture capital did about it... an increased prevalence of a 'spray and pray' approach."

Seth Levine — Referenced source for Correlation Ventures' power-law return data. Cited to substantiate the extreme skew of VC outcomes.

"Correlation Ventures found 65% returning less than 1x and only 4% returning 10x or more (via Seth Levine)."

Abuzov — Researcher (JFQA, 2025). Cited for finding on the cost of partner overload/attention scarcity in VC portfolios.

"Abuzov finds that startups backed by VCs during periods of unusually high workload are 9% less likely to subsequently IPO or be acquired."

Kaplan and Schoar — Academics (Journal of Finance, 2005). Cited for the finding that fund size and performance have a concave relationship, undermining the "raise a bigger fund" instinct.

"Kaplan and Schoar found the relation between fund size and performance concave, and that a GP raising a larger fund posts weaker returns than their prior one."

5. Operating Insights

Calculate your actual graduation rate before touching your model. Most firms have never measured this rigorously and are unconsciously anchored to outdated assumptions.

"Calculate your own graduation rate. One definition, one time window, every fund you have raised. Most firms have never done this and are quietly running the market's number, or a memory of 2019."

Audit reserve coverage against actual pro-rata absorption capacity. Excess reserves sitting idle (or misallocated into bridges/super pro-rata) are worse than deploying that capital at entry.

"Compute reserve coverage. Reserve per graduate divided by what your pro rata rights actually absorb. Above 3x you are holding capital you cannot legitimately deploy. Move the excess to entries."

Widening entry count only works if underwriting quality doesn't degrade — and it requires productized operations to scale. More positions demand process infrastructure, not just capital reallocation.

"Cost the marginal company before you add it. If entering one more position costs three partner weeks, fix the process before widening. Forty positions only works when entry memos come off a fixed data spine, monitoring runs on thresholds and alerts rather than a reading list, and portfolio support is productised instead of bespoke." "Width pays only if your 40th entry is as good as your 25th."

6. Overlooked Insights

AI's share of pre-seed capital jumped dramatically in a single year, directly fueling the funnel imbalance. This stat is mentioned briefly but is a key structural driver of the funnel-widening problem.

"AI went from roughly 30% of US pre-seed dollars to 50% in Q1 2026 (Carta)."

Series A pricing has become sharply bifurcated between AI and non-AI companies, which changes what a given check size actually buys. This nuance complicates simple "smaller check" prescriptions.

"Carta puts an AI foundational model Series A at a $300M median valuation against $55M for a non-AI company at the same stage... so what €1.49M buys depends entirely on which half of the market you are entering."