If capital is a tool, we need new tools. What *is* the future of funding?

Sarah Drinkwater
5 min readJun 21, 2022

TL;DR: right now, I’m fascinated by the topic of the “future of funding (including VC)”. I’ve been building a curated collection on Startupy and this post is a ~batsignal~ — a shoutout to find fellow obsessives, relevant pieces and perspectives.

A few weeks ago, I went to Allocate, an event to help GPs (general partners) in VC (venture capitalists) meet LPs (so many acronyms! limited partners — the folks who put money into their funds). It was an interesting day partly because of the topics that didn’t come up — and a big one was the actual future of venture capital.

Why does the future of VC matter to anyone outside of VC? And isn’t venture a small part of the funding landscape?

Ever since tribes have got together to trade, we’ve used capital (in all forms) as a tool. It’s how we allocate shared resources, define value, or permit certain ideas to grow. And in various seats I’ve had, I keep thinking about how the capital tools we have right now are insufficient.

For example, I’ve been a startup employee who went through a tough exit (the team I led got canned; I made £0) after our lead investor refused to keep backing us.

I’ve been a Big Tech worker running a space for entrepreneurs trying to be as neutral as possible listening to hundreds, maybe thousands, of would-be founders getting early ideas off the ground.

I’ve worked in philanthropy using flexible funding across for-profit and non-profit companies to build a better internet,

I’m now an angel investor. Angels have different constraints to VC (you’re not investing someone else’s money, for one) but obviously you’re picky and you back companies you hope will thrive.

I’m on for-profit and non-profit boards watching companies negotiate cashflow in a downturn.

And I’m contributing to web3 orgs like Gitcoin that work to raise and redistribute funding towards projects from open source to nonprofits working in climate or advocacy.

Forgive me for the whistlestop tour of my CV but I hope it helps you understand all the different seats I’ve had around the cash table. Consistently across the seats, I’ve observed the same problem come up again and again: the mismatch between the shapes of funding available and the shape of potential solutions to challenging problems we should want people to work on (and I’m not even going to go near the issue of bias in who we believe brings forward great solutions).

It’s confusing because:

  • The world is full of very hard problems
  • People are brilliant and great ideas can come from anywhere
  • There is enough capital to go around (genuinely; there is, just not equitably distributed)
  • And historically it’s innovators & entrepreneurs of all stripes who have attempted new solutions, created jobs, etc

And yet! There are actually lots of interesting shifts happening if you look closely. Here are just a few topics I’ve been tracking:

The individual and the collective in venture

  • People build trust with people. So it makes sense that, in terms of equity investing, we’re seeing more super-angels and solo GPs — individuals with a particular specialism or distribution channel (think Not Boring, 20VC or Pragmatic Engineer — noting that some are evolving into teams) who raise from LPs
  • Angel groups — like my collaborators at Operator Exchange or “venture networks” like 10x Founders in Germany — who benefit from smart operators with day jobs that can dive in or out of deals depending on appetite, skillset and capacity
  • Investment DAOs that work to unbundle VC through collective approaches to both investment but also provision of services. 1kx’s Peter wrote this great mapping of the landscape, and I’m especially tracking Syndicate who have taken smart approaches to their LP base and approach
  • And if we’re talking about groups and access, an honourary mention to Stonks, a playful way to gain access to multiple startup demo days online

Resisting equity

  • When I lead Campus, I heard first-hand how many founders were uninterested in venture capital. Sometimes this was because they’d had such a rough ride of initial meetings, sometimes because they could grow organically and wanted to maintain control.
  • Groups like Indie Hackers advocate for small rapid experiments and bootstrapping companies as they grow
  • And Zebras Unite (disclaimer; funded at Omidyar) is a movement for founders — with a Fund function that brings together groups to deploy debt, equity and hybrid capital into its own members

Web3 reframes grants

  • What about ideas or solutions that don’t suit for-profit investment or aren’t ready yet to decide what they suit? Grants should be the solution here but, in many of their current iterations, they aren’t fit for purpose. Founders consider the process of applying deathly and opaque; grantmakers (I should know, I was one) have good intentions but are lost in a sea of multi-page thesis memos about what is and what is not in scope. MacKenzie Scott proves there’s a better way — but few individuals have this wealth and freedom.
  • An interesting trend in crypto is the reframing of grants. Rather than charity, grants are essential to the survival of protocols and ecosystems, who need developers and operators to build within their system. So we’re seeing a new form of grant — often small-scale and rapidly deployed, with few strings attached — that grantmakers outside of web3 should look at more closely.
  • Beyond this, I’ve been fascinated by the interest in “public goods funding” in crypto. Think digital public goods like open source or broader public goods like clean air or good law. Gitcoin is a leader here (disclaimer; I contribute to their public goods stream), using quadratic voting to democratically deploy the matching funds they raise in four grants rounds a year.
  • And also, the sheer level of capital in crypto means we’re seeing certain enlightened individuals move beyond angel investing or whatever else rich folks do with their cash, and put it back into system — there’s an argument that tech philanthropy moves in waves, and FTX Future Fund (funding large amounts, often against effective altruism principles for long-term benefit of humanity)

Funding people not things

  • If you look at the above list, one thing that jumps out is that nearly every capital mechanism involves funding an entity, an organisation that exists. But to have an organisation exist you very often need to have a purpose; I’d argue we very often need to explore, play and test to determine that. Tyler Cowen’s Emergent Ventures and Optimism’s Retroactive Public Goods funding are two interesting mechanisms, but we need a lot more, outside the format of a 12-month fellowship.

Zooming out, a writer whose ethnography I love is Nadia Eghbal; this post in science funding in the last decade is great.

So, fellow bats, what trends am I missing? And, beyond more choice for the founder and more potential problems solved, what does all this movement mean?



Sarah Drinkwater

Solo GP Common Magic, investing in products with community at their core. Into communities, the best uses of technologies, London, looks and books.