In this segment of the My First Million podcast, Sam Parr and a co‑host discuss a emerging trend where traditional venture capital (VC) firms are evolving into hybrid models that resemble private‑equity or hedge‑fund strategies. They argue that as more private companies stay private longer, VCs will need to generate returns by buying and holding companies for their cash‑flow rather than relying on IPOs or acquisitions. The conversation cites several real‑world examples: Andreessen Horowitz’s reclassification to own crypto assets, Chamath Palihapitiya’s Social Capital and its use of SPACs to take companies public without a traditional IPO (e.g., Virgin Galactic), and Andrew Wilkinson’s Tiny Capital, which aggregates cash‑flow‑positive businesses, takes dividends, and reinvests them into new acquisitions. The hosts contrast this cash‑flow‑focused approach with growth‑at‑all‑cost models like Brandless and Jet, which lacked sustainable cash flow and ultimately failed. Throughout, they suggest that the future of VC may involve more operational ownership and dividend‑driven acquisition strategies.
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The companies that they own collectively, I think, do about $100 million in revenue. I think that now that private companies are staying private for long and not going public as much, what I think needs to happen is I think the venture capitalists, a lot of VC firms, need to start buying companies and just need to own them for the cash flow versus wanting something to go public or get bought. And so what I think is going to happen is I think a lot of these VC firms are almost going to turn into hedge funds or private equity funds. We're going to start— they're going to buy and operate a lot more than they are now. And that's related to that.
So I don't think VCs will do it, but the sort of new age VCs that are going to be hybrids. So like Andreessen Horowitz shifted their model where they're not a VC, they're now a— I forgot what it's called, but like they wanted to be able to just own cryptocurrency. Just buy it and hold it and do other things. Yeah, I forget. So they needed to reclassify. And then, uh, this guy Chamath, he basically has a fund called Social Capital. It started off as a traditional VC fund and then like he had to restart it for all kinds of reasons. Um, but one of the things he does now is he has this thing called a SPAC, which is his special purpose vehicle for taking companies public. So you're a company, you don't wanna go public, he's already public and he just acquires a stake, you know, a stake in your company, I believe is, is how the mechanics work. So they just did this with Virgin Galactic. And so it's like a fast track to being public and getting that liquidity without having to go and be, you know, your own independent listing.
Yeah, I'm into that. I know Andrew Wilkinson is probably listening. He owns Tiny Capital and they do— they've been doing this. The companies that they own collectively, I think, do about $100 million in revenue. And he, I think, takes dividends and buys companies with the cash flow. Right. And it's an awesome model.
But a lot of these companies like Brandless, there's no cash flow, right? It's going to be a cash sink. It's one of these go big or go to zero. And in this, in this case it went to zero.
Yeah. But it doesn't have to be, it doesn't have to be.
But, um, it's also, that is also valid, right? Like to do the, do what like Jet tried to do, which is like, you know, they never made their core business work, sold for $3 billion, uh, because they, they went for the plow money in today, try to get the scale and then be the first to have scale doing what we do.
