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What's the use of venture capital while software is being commoditized?
Currently, VC business model is in shock, because VCs made their money on a playbook of funding software-only startups for over a decade. On top of that, the majority of VC talent is trained on SaaS, so there's immense confusion about what to do.
As of today, let's accept that software is a commodity; it's just programmable content.
Distribution is the sole moat for software products.
But distribution is not something that startups are great at. That's what incumbents thrive on.
The premise of software startups was that they would be faster in product development than the incumbents. By the time incumbents catch up in product development, startup would have sufficient distribution and brand in a newly established fast-growing market.
Well... @AnthropicAI, @Google, @OpenAI and other AI-forward incumbents can do all of that now.
Then, where are the opportunities for founders and venture capitalists? Should venture dollars fund essentially programmable content marketing companies, also known as "software startups"?
If you're building a software-only AI company and you have a FOMO to make quick money in the gold rush, then bootstrap it. You don't need VC funding for that. Just moonlight it on the side at nights with your AI agents until you make some money with ads and SEO/GEO, then quit your job. I'm rooting for many people to reach financial independence.
If you really want to get VC funded for a software startup, then get that capital from media empires such as @a16z . They have the distribution and brand that you can borrow, exactly like how you'd work as a product manager at big tech or frontier lab. Opportunistically, as part of our fiduciary work, we'll put some capital to work in those use-cases to deliver returns to our investors.
Funding commodity businesses is not something I feel passionate about. Venture capital was famously known as liberating outlier people to do ambitious and risky work. That's what I fell in love with.
In 2026, building a software company is not that.
It's no longer my job as a venture capitalist to fund commoditized software businesses that anyone can replicate.
My job, as a VC, is to enable ambitious people to solve important problems of our world.
1) Invent new materials.
2) Help us discover space and oceans.
3) Protect individuals and businesses from bad things.
4) Come up with new inventions to extend our lives.
5) Build robots.
Risk-averse LPs: please do not invest in venture capital. Invest in S&P 500 and enjoy the returns.
Risk-averse founders: Create a software startup and enjoy the revenues without VC funding.
Risk-averse VCs: Build in-house teams to incubate software startups and co-invest alongside a16z.
At @VelaPartners, we'll work with ambitious partners who want to change the world.
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