Silicon Valley Elite Circle's Connection Game: Those with Backgrounds Get 50 Million, While the Truly Capable Can't Raise Money?
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Silicon Valley Elite Circle's Connection Game: Those with Backgrounds Get 50 Million, While the Truly Capable Can't Raise Money?
Those who follow the herd are waiting to be slaughtered.
Navigating Web3 tides with focused insightsAuthor: Shower Thoughts
Compiled by: TechFlow
TechFlow Editor's Note: Silicon Valley is shifting from meritocracy to relationships above all. Founders with Stanford backgrounds raise funds easily; VCs throw $50 million at "Central Casting" teams to build hype in advance, while truly capable outsiders can't raise money. This game works in the short term, but will ultimately lose to those undervalued outliers—those who follow the trend are waiting to be slaughtered.
Peter Thiel loves asking variations of a question: "In a given environment, what is the one thing you cannot say?" In the Evangelical-dominated South, it is dangerous to be gay and liberal. On university campuses, it is dangerous to be conservative.
In Silicon Valley, the dogma that cannot be questioned is meritocracy.
Silicon Valley has always prided itself on meritocracy. Outsiders with no background or connections could emerge, build generational companies, and be rewarded for it. This industry has always prided itself on being 2,851 miles away from Washington D.C.—that place notorious for getting things done only through lobbying and insider connections.
Nowadays, outcomes in Silicon Valley depend on who you know and how willing they are to propel you to the top.
This is no different from how any other old money industry operates. On the East Coast's senior finance circle, you need to attend the right elite schools. In the British political circle, you need to have the right family surname.
How did Silicon Valley transform from a meritocracy into a kingmaking game?
Consensus Groupthink
It is no secret that Silicon Valley thinking has become extremely consensus-driven in the past few years. This mainly stems from 1) AI distorting growth expectations 2) LP capital concentration 3) Professionalization of the VC industry.
First, AI has completely distorted expectations for revenue growth. For the first time in history, we see startups going from 0 to $100 million ARR within one or two years. Compared to the SaaS era, consistent annual triple-digit growth would take your company to an IPO. Even more exaggerated is this scale of growth like Anthropic—from $9 billion ARR in December 2025 to $47 billion ARR in May 2026 (adding up the annual revenue of Palantir, Snowflake, and CoreWeave along the way), this is unheard of.
Well-known VCs now say, never invest in rough gems. Either wait until you see the inflection point to try to enter the hottest companies, or try to pattern-match past successful cases and hype a new company early on. The former is the correct strategy for growth-stage investment; the latter is a mistake. I will explain why and how this affects founders later.
Second, LP capital has concentrated into the hands of a few mature multi-stage franchise funds. In the first half of last year, 12 VCs took 50% of all LP capital. This is mainly a reaction to the overallocation to the VC asset class in 2021-2022, and a flight to "quality" brand names where institutional allocators don't have to risk their careers defending them at IC meetings. Especially family office LPs, who care particularly about getting into hot Silicon Valley companies, no matter how high the valuation. If VC funds must buy tiny equity stakes in hot companies at high prices to secure LP capital, then so be it.
Third, the culture of the VC industry has shifted from a boutique craft to a mature career path. More than a decade ago, venture capital was a craft. Like medieval guilds, VCs followed an apprenticeship model, where experienced old GP trained young junior VCs to master the taste for judging founder quality and the feel for market timing.
Over time, the VC industry has professionalized into another standard career path. Previously it was 2 years investment banking → 2 years business school → private equity; now it is 2 years big tech → 2 years high-growth startup → venture capital. Once there is a standard career path, it attracts those trend-following excellent sheep NPCs, rather than the extremely independent thinkers the industry relies on to make contrarian investments.
Given that IPO timelines are longer than ever, thereby extending feedback cycles, getting into hot companies (not necessarily the best companies!) is a better strategy for promotion within VC firms. Mid-level VCs would rather get quick and easy markups from safe consensus bets than risk betting on a potential fund returner. Turnover at large VC firms is also higher than ever, so they might not be at the firm in a few years and won't get the carry attribution for that return-generating deal.
Consensus Money Attracts Consensus Founders
People would assume typical startup founders are extremely non-conformist rebels, carving their own path in the world, not caring at all what the establishment thinks. These founders are often polarizing to their peers, don't follow boss's instructions, and would be fired from structured corporate jobs. But this is less the case now.
Startups are becoming a more standard career option, no different from big tech or consulting. A contributing factor is that the unemployment rate for recent college graduates looking for entry-level white-collar jobs is high, as these jobs are decreasing due to AI. Rather than suffering through job hunting, might as well apply to a startup accelerator, treat it like an internship program, burn $500k to have fun and figure out adult life.
The Stanford Review once wrote that YC is for cowards. As YC increased from 2 batches per year to 4 batches (about 800 startups per year!), plus the explosive growth in the number of other accelerator programs, it is no surprise that typical startup founders have become more uniform and no longer non-conformist outliers.
Accelerators pressure startups to be understandable to VCs before demo day, so startups wandering around the idea maze trying to find product-market fit naturally tend to build in the most obvious crowded categories that have already worked. 81% of the current YC batch are doing AI for XYZ. Crypto startups are doing stablecoin neobanks in XYZ region or prediction markets in XYZ niche. Consensus VCs fund these consensus ideas because they feel safe and familiar, and can easily pattern-match to things that have already worked. But the truth is the best companies define new categories, and start years before that category becomes obvious or even has a name.
For founders who don't go through accelerators, good background is more important than ever. Anyone who attended Stanford can raise funds. Anyone spun out from OpenAI can raise funds. Check size and valuation are a function of how good the pedigree is and how extensive the founder's connections are in the VC circle.
Beyond that, large multi-stage funds are giving a batch of Central Casting figures (i.e., those with the best pedigrees) $10 million to $50 million war chests to kingmake a category before their companies have traction, making it hard for others who are not Central Casting to win these markets.
So now it is no longer "Can you build a great company?". It is "Can you fit the mold that large VC firms want to fund?"
A soulless inner circle—where those with background and connections get preferential treatment—this goes against the meritocracy ideal that any skilled, hard-working entrepreneur can win. Meritocracy historically gave Silicon Valley its halo, being the only place in America where the American Dream still exists and works. Today Silicon Valley is becoming more like Wall Street or K Street.
Founders outside the network now feel they must play "this game" to become one of the Central Casting figures. This means hanging out with VC associates at happy hours and dinners, acting slightly aloof to create FOMO and funding momentum. Usually founder VC networking is a waste of time; they should focus on building the company and talking to customers. Now this is all part of the game, an extra skill founders must cultivate.
Downstream Effects of Kingmaking
To be fair, kingmaking does work to some extent. Raising large capital gives you a huge war chest to acquire customers at a loss (i.e., acquire users unprofitably until your competitors go bankrupt or pivot). It scares other teams from entering your market to compete.
However, kingmaking also creates moral hazard for misconduct. Companies become ~creative~ in reporting revenue, and founders sell secondary shares very early.
Kingmaking pressures companies to show revenue growth at all costs to be understandable to VCs. This leads some companies to outright lie about revenue (securities fraud), or get creative with methodology. One example is taking one-time contracts and annualizing them into ARR. These contracts are usually just pilot pricing with exit clauses, so ironically they are neither "Annual", nor "Recurring", nor even "Revenue". Another example is rebranding ARR from "annual recurring revenue" to "annual run rate", and calculating ARR as last week's revenue × 52 or even last day's revenue × 365. This isn't exactly securities fraud, but it doesn't look good for anyone doing due diligence.
VCs trying to compete for kingmaking rounds usually allow founders to sell secondary shares to win the deal. Obviously, 10% of hot company rounds going to founder secondary shares is now common practice. The downstream effect of founder secondary shares is that it attracts scammers. Those who can play the "game" described above well to create VC FOMO in Series A, and use it to sell millions of dollars of founder secondary shares (often exceeding the company's lifetime revenue), and then slowly rug pull.
Mean Reversion
The pendulum has swung too far towards consensus today, I bet there will be a mean reversion towards contrarian thinking.
History repeatedly shows that the hottest theme in any given year is not the category to which the most valuable company founded that year belongs. I have no reason to believe this time will be different.
I would rather support the outsider with a chip on their shoulder around the clock, rather than the insider crowned too early by VCs. I believe there is a huge blind spot outside the Silicon Valley groupthink bubble—those great founders with no background, not in the distribution, incomprehensible to most VCs.
I am optimistic that meritocracy will ultimately win, and those chasing momentum playing the kingmaking game will be left licking their wounds.
Those who follow the trend, wait to be slaughtered.
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