Swinging for the Fences is Not the Only Strategy
I was recently at a Startup Week event, and a presenter told the room, “If you aren’t swinging for the fences, you aren’t doing venture.” She was referring to the fact that in traditional venture investing, a handful of enormous winners return the fund while most of the portfolio fails.
Therefore investors must invest for the biggest deals in order to provide any type of return. That statement bothered me a great deal because it highlights a problem within the industry that many of us have been working to change for years: a mindset that the traditional venture capital model is the only model that works for funding innovative businesses.
The fences are getting farther away
On paper, H1 2026 VC activity looks good. According to Pitchbook’s Venture Monitor, through Q3 2026 deal value hit $515.8 billion, roughly 44% above 2021’s full-year record, with AI capturing a record 82.7% share.
However, just 18 companies went public in Q3, most of them in healthcare. Active unicorns now total 992, worth a combined $5.7 trillion, with no clear path to liquidity. Some are exiting anyway, at a steep cost—Airtable sold for $1.3 billion and Miro was acquired for $1.4 billion, both at discounts of nearly 90% from their prior valuations.
That liquidity drought is also why capital keeps consolidating: LPs starved for distributions are re-upping with the managers who have delivered before. Established firms have commanded 88.2% of all capital raised YTD. That leaves emerging managers fighting over a shrinking pool of dollars, with the result that many first- and second-time funds take longer to close, raise less than targeted, or never close at all.
Emerging funds have historically been where much of the industry’s best returns and most differentiated sourcing come from: they back founders in underserved geographies, sectors, and demographics, and they often take the earliest, riskiest bets that larger firms only join once a company is de-risked. If that pipeline dries up, the startup ecosystem loses its seed-stage diversity, the next generation of top-tier firms never gets a chance to form, and LPs end up overexposed to a handful of incumbents whose growing fund sizes tend to dilute returns. Over time, a less competitive and less innovative market serves founders and investors alike more poorly.
In short, when the fences move that far back and so few players get to swing, “go big or go home” stops being a philosophy and becomes a bet that most investors, and most founders, will lose.
All-or-nothing has a cost, and others pay it
The all-or-nothing model doesn’t just fail investors. It shapes the founders it funds.
Each equity round typically dilutes founders by 18-20%, and founders who reach Series C
often own less than 17% of the company they built. Investors who need a billion-dollar outcome push companies toward growth at all costs, even when a profitable, durable business is within reach. A founder who builds a great $20 million company may be told that it’s a failure, because it doesn’t return the fund.
And there is a large middle: companies with real revenue and real customers that are growing steadily but not at hypergrowth pace. Only 14% of entrepreneurs in the SEC’s small business data received all the venture capital they sought. The rest aren’t bad businesses. They just don’t fit the mold.
Liquidity is relevance
The angel community feels this acutely. Angels across the country are writing fewer checks because exits are scarce and money stays locked up for a decade or more. Investors lose interest when they can’t see returns.
That’s the heart of my disagreement. If the venture ecosystem wants to stay relevant, it has to give its investors a reason to keep investing. Waiting out the clock for a rare home run is not a value proposition, and patience and investable funds are not infinite resources.
Innovate on the model, not just the portfolio
I’m not arguing that venture capital should disappear. Some companies, such as deep tech, biotech and platform plays, need risk capital and can produce outsized outcomes. Equity belongs in the mix.
My argument is that swinging for the fences shouldn’t be the only way to be a serious investor. The firms that stay relevant in a low-exit environment will be the ones that build more than one tool:
Revenue-based financing gives investors a percentage of monthly revenue until a set amount is repaid. Founders keep ownership and control, payments flex with the business, and investors see cash back in years, not decades. Our first two funds achieved/are tracking to achieve 100% DPI (distributions to paid-in capital) within five years.
Structures that sit alongside equity. This year we announced a program to allow angel groups to co-invest in RBF deals without changing their core model, so members receive regular distributions and keep writing equity checks.
Terms designed around outcomes other than the unicorn. In an earlier blog post, we shared what three funds have taught us about fee structures, reinvestment and investor psychology. The lesson is that you can experiment with the model itself and keep what works.
None of this means giving up on ambition. It means defining success as something other than a binary outcome, so that a company that grows steadily, pays back its investors and keeps its founders in control counts as a win.
What “venture” should mean
To me, venture is about backing entrepreneurs who are building something new and sharing in the risk and the reward. Nothing in that definition requires an all-or-nothing payoff.
If the only way to “do venture” is to swing for the fences, then we’ve defined the field so narrowly that most great businesses and most investors are left out. I’d rather widen the definition, build models that work for founders, investors and communities alike, and measure ourselves by how many people we help succeed rather than how big the biggest swing was.
About Sage Growth Capital
Sage Growth Capital makes revenue-based investments in companies at any stage who need growth capital. It is our mission to provide a more flexible, non-dilutive funding option to growing companies who do not fit traditional equity or lending models. To learn more about Sage Growth Capital or to apply for funding visit: www.sagegrowthcapital.com.
About Revenue-Based Financing
Revenue-based financing (RBF), also referred to as royalty financing, revenue share or revenue-financed capital (RFC), is a non-dilutive form of growth capital where investors receive a percentage of monthly revenues until a set amount has been paid. RBF differs from equity financing as the investor does not obtain ownership of the company and it differs from debt
