Startups have begun to exit their Slop Era. The ease of founding with new AI tools and the deluge of accelerators have made startups another career choice alongside investment banking and consulting. Young founders are chasing the aura that comes with starting a company, not the satisfaction that comes from creation, the manifestation of expression, or a deep desire to succeed.

As a result, these founders have taken the path of least resistance when trying to build a moat. Tab over to X and you’ll notice that every other post is a high-production announcement for a new endeavor. Making noise and occupying mindshare has become the default, and investors have come to desire low-calorie momentum above sustainable fundamentals.

This is the minor league version of kingmaking. It’s a sub-scale attempt at flooding the space to manufacture the perception of a lead. These are flash-in-the-pan moments that tend to fizzle quickly after it becomes evident that robust systems, time, and frankly, integrity, are the necessary ingredients for product-market fit. I’m pleased that the pendulum is swinging back to quiet commitment and diligent dedication.

But over the past few months, the major league version of kingmaking has made its way back into the venture zeitgeist. We’ve witnessed a more pronounced bifurcation of the asset class between emerging managers seeking alpha and capital agglomerators conducting large-scale indexing across the most legible parts of the market.

Kingmaking is the strategy where investors attempt to force a winner-takes-all outcome by inundating a company with so much capital and brand signal that competitors are starved of resources and attention, effectively buying market dominance rather than earning it through product efficiency. The functional definition is:

Kingmaking = Outsized Capital (Resource Moat) + Tier 1 Signal (Social Moat) + High Velocity (Momentum Moat)

Alpha-pursuing emerging managers tend to villainize the multi-stage firms that have the cache to kingmake. It’s easy to feel attacked as the little guy when the ex-OpenAI researchers make their debut with a $100M war chest before most get a whiff of their existence.

But I argue that kingmaking is perhaps the most rational thing these firms can do. Kingmaking is not conscious meddling by a conniving cabal of venture elites, but rather a series of logical decisions that hints at a venture market that may be more efficient than any of us would’ve guessed.

Descartes

To understand this, we need to examine the three legs of the venture stool: LPs, GPs, and founders. Starting furthest upstream, we have the LPs of the multi-stage firms who are here to invest in smart beta. They want to put large amounts of dollars to work in the most legible parts of the market. Despite brilliant framing to the contrary, the crowded trade is crowded for a reason.

Next, the GPs of agglomerators use these LP dollars to invest in the strategy they pitched. Massive funds mean a low cost of capital and incentives aligned around deployment velocity. Such a mandate requires GPs to back up the truck into businesses if they want to deploy equity, or to envision creative financing solutions as a way to offer more products to their core customers (read: hyperlegible founders). With more money typically comes more brand clout (or vice versa, up for debate), so these investors become the most desirable options for founders.

Finally, there are the founders who are hyperlegible to capital, the primary beneficiaries in all of this. These are folks who led teams at the AI research labs, became top lieutenants at venture darlings, or in some other way became embedded within the Silicon Valley flow. Because they are in the flow, they are conscious of the potential future value of their equity and are naturally drawn to the aforementioned firms, which will bestow them with the premium they believe they deserve. It’s rational, optimized behavior. It’s riding the SF-normative current.

At the end of the stream, you get gobs of capital and a media machine that makes yesterday’s slop wanna-bes blush. A massive balance sheet signals to customers that you’ll exist for years to come, making it easier to justify a long-term contract. Endless narrative dominance via TBPN cameos and front-page appearances forms a social moat. Then, downstream capital and talent naturally gravitate towards the kingmade companies as they become the Schelling Point of a market.

These forces compound, and in no time, more capital comes flooding in because why wouldn’t you want to fund the anointed winner? Why take on the extra risk in pursuit of being an oracle? Perhaps you’re right in choosing the runner-up, but you’ll be written off as a Cassandra. Then, headcount grows because why wouldn’t you want to work at tomorrow’s decacorn? Why take on unnecessary career risk when the logo and cap table could be worth their weight in RSUs? And on every dimension, velocity increases. Why wouldn’t a founder take this deal?!

And why wouldn’t a fund manager who has the resources do their best to pull this off over and over? Capital and brand are weapons, and whoever can deploy them the cheapest will win. If you believe that narratives dominante and reflexivity is a core lever in the market, then you should make sure to mark your territory first. It’s a high-stakes prisoner dilemma.

Emerging managers often wince at this reality, complaining these firms are egregious price setters who suck the air out of a market. In reality, the founders are price setters because they’re hyperlegible to capital and therefore act in their best interest to command the highest price from the best firms! Kingmaking is a well-oiled machine in which all participants are fully cognizant of the rational ways they’re behaving! There’s no such thing as value investing in venture.

I suspect the reason this has become the topic du jour once again is because of, yes, the perceived terminal value of the AI trade, but more importantly, the new media efforts of venture capital. The potential for power law outcomes in every market AI touches is one thing, but having every fundraise broadcast across the entire tech industry daily makes it inescapable.

It’s a savvy strategy by the agglomerators, and it works for them. Their moat comes from maintaining brand hegemony. The best way to do that is to get into the very best deals. The second-best way to do that is to convince everyone that you already got into the very best deals.

The natural question to ask ourselves is “Do we care?” I believe that to get worked up by kingmaking is a waste of energy units. The subscale managers are fundamentally investing in a different asset class than their colleagues at the megafunds. At the pre-seed stage, the responsibility is being first to uncover illegible alpha and gain conviction before others, and then to help make it legible in the eyes of downstream capital. Our responsibility is to help the founder and broker customer introductions, act as talent recruiters, and make the sausage; all the ugly stuff that’s core to building a sustainable system. With each granule of de-risking, the company gets closer to legibility.

Once there are glimpses of legibility, our job shifts to becoming shepherds and advisors, helping founders navigate the capital markets as effectively as possible so they can level up, and perhaps get kingmade themselves. This is how all markets operate: bankers steward management teams through roadshows to best tell the story of the business in order to raise additional financing. For the pre-seed investor, a Seed or Series A raise is the consequential tipping point, and so it’s imperative to act with the same discipline and rigor as our hallowed forefathers of finance.

So then, should we care about kingmaking?

We can, but we shouldn’t. Missing out on a 9-figure Seed round for an RL company is fine – as it’s not the product emerging funds set out to deliver. The venture agglomerators are playing a different game, as are distressed private equity funds, as are event-driven hedge funds, as are core-plus real estate funds. They’re all great products, but they’re different products for a reason.