I opened the recording by asking Santosh whether I was crazy for wanting to start a Series A fund. Half joke. He did not treat it as one.
He came back with a field report. He has spent months catching up with partners at household name firms, the kind you would have called a Sand Hill Road Series A fund. One told him his partnership is taking far more interest in growth and late stage. Santosh pushed on Series A. They had not done one in months. He asked what they were doing instead. The answer was seed. Not out of love for seed. Out of fund size. In Santosh’s relay of it: “we’re not getting ownership at these late stages, so we’re doing seed rounds of five to $10 million, and we get 15% ownership, 20% ownership.” Sitting on a billion or two, a firm can absorb those losses. So it buys the option instead.
That is the gap, described by the people who opened it.
I did not walk in undecided. I have been building toward that stage for a while, and I have read messy middle enough times to know what conventional wisdom says. What this conversation did was replace my instinct with mechanics.
Three things I took.
The labels stopped doing work, and that is the opening. Santosh put it plainly: “increasingly I find like the nomenclature of pre-seed seed A probably doesn’t matter as much.” His illustration is the cleanest version of the problem I have heard. You can raise a large seed. You can raise a small Series A. He does not know what to call the thing between them, and it lands between five and twenty million depending on what you are building. His conclusion is structural, not semantic. A franchise in the middle may need to write a five million dollar round and also something closer to a forty or fifty million dollar Series B, out of one pool.
The job is general manager, not card counter. You are not playing poker, running percentages against rigid rules. You are the general manager of the Pittsburgh Pirates or the Cowboys or the Knicks, assessing talent all the time. A free agent. A one and done phenom. A guy who spent six years in college with NIL money behind him. Each archetype carries its own diligence, and the portfolio follows from that instead of the other way around. One SKU does not work. Some of these are high priced luxury at the start and some are a fixer upper. Santosh added the discipline that keeps this from becoming drift: an opinion that is data informed, and a clear read on where you want to enter. In some situations he would rather come in at seed. In others there is enough risk that he will leave return on the table and wait for the B.
The mega funds may be building demand for the thing they displaced. This is the one I did not have. Santosh thinks the ascension of mega funds “might actually be priming the pump for this type of a strategy.” The mechanism is the good part. A billion dollar vehicle does not invest at one stage or one profile. The LP writing that check is already underwriting a blend, some late stage, some early growth, some seed and Series A, and does not get to price the pieces separately. So the muscle for a flexible single pool already exists in the LP base. It got built by the firms that made the gap.
Where I am not settled.
Scope creep. I have spent years telling LPs to ask whether prior success at one stage predicts anything at another, then spent this episode arguing for flexibility across three of them. I put that question back to the industry on air. Santosh answered with what is actually happening: “all the rules have been thrown out the window. If you see where LP dollars have been flowing.” That is a description of behavior, not a defense of it. I do not have the resolution.
Reversion, too. He asked me straight what the risk is that the market goes back to clean lines. I said I am not sure we ever return to rigid ones, but I expect more blurred ones. That is a hedge, and it should stay one.
The thing nagging at me came from the last Swimming with Allocators episode. Rachel Kloepfer read the same barbell from the LP chair on Swimming with Allocators and inverted it. Her view is that SaaS and consumer belong with a big fund, because distribution is the moat. We keep landing on this show at your why, and the deeper version is your worldview. Mine is that technology should make for a more connected society, and the practical form of that is being the person who finds a founder their customers. So her argument makes distribution the thing scale supplies, and mine makes it the thing I supply. I have not worked out which of us is describing my market.
The closing thing I said is the part I believe most. Building a firm right now is an essay test, not a standardized test. Standards are being broken every day. The answer sheet is not coming. We have to create it.
Listen here: https://carryonpodcast.com/podcast/mind-the-gap-who-actually-does-series-a-anymore/
With gratitude,
earn