In the era of AI, I realized that the role of venture capital has fundamentally changed. As a16z partners point out, the era where "judgment alone determines success" is completely over.

Once, venture capital was like choosing your favorite sushi toppings from a conveyor belt. In other words, as long as you had a discerning eye for identifying promising companies, that was enough. But now, it's completely different. The world has changed, and both the funding needs of startups and the competitive structure of the VC industry have been fundamentally transformed.

Software is no longer a peripheral part of the economy; it has become the economy itself. We are in an era where Google, Amazon, and Nvidia dominate the world's top companies. Correspondingly, the scale of funding required for successful startups and the quality of support have entered a completely different dimension. As seen with OpenAI and Anthropic, cutting-edge companies need initial funding in the hundreds of millions of dollars.

This is a crucial point. The reason large institutions like a16z are emerging is not just their financial power, but their ability to provide what entrepreneurs truly need. They offer expertise and networks across all areas necessary for growth—recruitment, market strategy, legal, finance, government relations. This is structurally impossible for small-scale VCs.

There was once criticism that "scaling up causes the soul to be lost." But in reality, the returns of top institutions remain astonishing even after scaling. Cases of funds worth a billion dollars achieving more than tenfold returns are increasing. This is proof that their competitive advantage is genuine.

If entrepreneurs today were ten or a hundred times more numerous, what should the global VC ecosystem look like? The answer points to the necessity of scale platforms like a16z. The best institutions will concentrate the best entrepreneurs and capital. This is a natural consequence of the power law.

The future of the VC industry is likely to be "dumbbell-shaped." On one end, there are mega-scale players; on the other, niche funds with specialized expertise in specific fields. The middle tier will struggle the most because they cannot afford to miss large deals, nor do they have the capacity to compete with large institutions.

a16z’s strength lies precisely in occupying both ends of this dumbbell. It combines the power of a scale platform with deep specialization. This duality creates a sustainable competitive advantage.

Ultimately, the era has arrived where venture capital itself must evolve under the same rules as the companies it supports. In the process of technology disrupting the industry, some things will be lost, but what is gained will be even greater. The disruptive mindset that VC has always demanded from entrepreneurs is now also necessary within the VC industry itself. The process of software engulfing the world is relentlessly applying to the venture capital industry as well.