The World of Venture Capital: Part 1

The Invisible Hand Behind Innovation: How Venture Capital Shapes the Future We Live In.

In 2021, a 24-year-old founder walked into a glossy coworking space in Bengaluru, opened his MacBook, and pitched a “voice-based AI platform for blue-collar hiring” to a group of angel investors. He had no product, no revenue, and barely a working prototype. By the end of the week, he’d raised $350,000.

Today, that startup is defunct. Not because of fraud, not because the idea was bad but because the hype outgrew the execution.

This isn’t a rare story in venture capital. In fact, it’s how most stories begin or end.

Welcome to The World of Venture Capital -  an ongoing series where we peel back the glossy surface of startup investing and explore what really happens behind the term sheets. 

We’ll go beyond the headlines, challenge what you think you know about VC, and unpack how this high-stakes system of belief, money, and ambition shapes the future for better or worse.

Venture Capital Is Not Just Money, it’s a Belief System

At its core, venture capital isn’t about spreadsheets or bank accounts. It’s about backing ideas long before they make sense  and hoping a few of them rewrite the rules.

VCs fund companies that are:

• Too early for banks

• Too risky for traditional investors

• Too bold for predictable outcomes

But here’s the catch: venture capital isn’t built to support most companies. It’s built to support outliers. The entire model rests on a power law, the idea that just one or two bets will return the entire fund, while most others will fail.

That’s why VCs are not looking for good businesses. They’re looking for exceptional, improbable, category-defining outcomes. Think Flipkart, Ola, Razorpay, or Nvidia. In other words: home runs, not singles.

How VC Actually Works?

On the surface, it looks like this:

• A founder builds a startup

• A VC gives them money in exchange for equity

• The startup grows

• Everyone makes money at exit

In reality, it’s messier.

VCs raise their own money from Limited Partners (LPs) — institutions, wealthy individuals, family offices, etc. These LPs expect returns over a 7–10 year horizon. So VCs have to deploy that capital fast, find moonshots, and show paper returns (not even real exits!) to raise their next fund.

This creates pressure, pressure to invest quickly, to chase trends, to compete for “hot” deals, and to sell belief over business fundamentals.

It’s not uncommon for VCs to commit to startups after just a couple of meetings. In some cases, without even trying the product.

Because in VC, missing the next unicorn is worse than backing a dud. That’s the psychology.

When Venture Capital Works… It Changes the World

Let’s give credit where it’s due.

Without venture capital:

• India wouldn’t have seen startups like Udaan, Swiggy, Zerodha, and Meesho.

• Clean energy breakthroughs wouldn’t be funded fast enough.

• Deep tech, healthtech, and agri-tech in India would struggle to move beyond labs.

VC can be transformational. It brings capital, mentorship, networks, and credibility. In India, it has played a critical role in catalyzing new industries — fintech, D2C, SaaS, and edtech, to name a few.

But there’s a darker side.

When Venture Capital Fails… It Still Gets Glorified

For every startup that makes it, there are hundreds that quietly shut down. Yet, failure in VC-backed startups is rarely talked about with accountability. It’s often framed as a noble casualty of “thinking big.”

The truth? The VC model is not designed to optimize for sustainable businesses. It’s optimized for speed, scale, and optics.

Many companies raise millions, burn through it in a year, and then disappear. But the founders move on, the VCs write it off, and the media moves to the next round.

Worse, some problems are systemic:

• Herd mentality: Once one VC funds a sector, others pile in.

• FOMO-fueled investing: Fear of missing the next big thing drives irrational decision-making.

• Overfunding: Too much capital can kill discipline. Startups scale before they’re ready.

In this model, a startup’s story often matters more than its substance. That’s why you’ll find pitch decks full of buzzwords: AI, Web3, ESG, gamification, etc. even when they’re irrelevant.

Who Really Wins in Venture Capital?

A question few ask.

Contrary to popular belief, most VCs don’t get rich off startups. Unless they’re managing billion-dollar funds or have a unicorn in their portfolio, they’re grinding for exits just like founders.

LPs, on the other hand, often get guaranteed returns (preferred shares, liquidation preferences) and minimal exposure to risk. Founders? They dilute heavily across rounds and are sometimes left with less equity than their early employees.

In some cases, the only real winner is the story.

So Why Does This Game Still Matter?

Because despite all its flaws, venture capital remains the only engine powerful enough to fund the seemingly impossible.

It’s imperfect. It’s risky. But it’s also the reason we have breakthroughs in medicine, mobility, renewable energy, and AI.

And for all the bluffing and theater (which we’ll dive into next), there’s something undeniably inspiring about a system that backs dreamers.

Coming Next: Part 2 — The Bluff Game: Founders Lie, VCs Lie Back

In our next blog, we’ll go inside pitch rooms. The high-pressure spaces where charisma trumps code, where investors pretend to be more interested than they are, and where entire funding rounds can hinge on perception.

You’ll learn:

• Why storytelling matters more than data (especially in pre-seed and seed rounds)?

• What tricks founders use to get funded?

• How VCs bluff too, to close deals, create FOMO, and protect their image?

Because when millions are on the line, everyone plays the game.

---

If you want to dive deeper into The World of Venture Capital, I’m soon launching VC Times, a weekly newsletter that brings you the sharpest insights, deals, and trends from the Indian venture capital world curated with clarity and zero fluff. 

Subscribe now to get early access: Click here!

Thanks for reading my thoughts and as always, rooting for you from afar.