The venture capital model is broken. That is not a fringe view. It is increasingly the consensus among practitioners, founders, and observers of the asset class. What Omri Hurwitz offered in his recent conversation on the IsraelTech podcast hosted by Yoel Israel was a specific and structurally rigorous account of why, and a provocative sketch of what should replace it.
Hurwitz runs a PR and media firm, not a fund. But he works with VCs and their portfolio companies closely enough that his perspective carries weight. And his critique is not about bad actors. It is about misaligned incentives baked into the architecture of venture itself.
Everyone Has a Different Game
Hurwitz opened by laying out the interest matrix. A seed investor’s primary goal, he argued, is not to build a great company. It is to get a company to Series A or B quickly, because that milestone enables them to raise their next fund, attract institutional LPs, and collect management fees.
“Their whole goal is to get the company to like series A series B kind of setting because once they get the company to series A series B kind of thing, they go in and they can start raising their next fund,” Hurwitz explained.
This is not a malign goal. But it is not the same as the founder’s goal. The founder wants to build something durable and eventually achieve personal liquidity. The growth investor wants to ride a proven asset toward an exit or IPO. Each player is optimizing for a different prize on a different timeline.
Founders who don’t understand the table they’re sitting at, Hurwitz argued, make systematically bad decisions, accommodating investors at the expense of the company, confusing the game of the seed investor with the game of the business.
The 5% Who Generate Everything
The structural problem is compounded by a brutal performance distribution. Hurwitz cited a figure he presented with the confidence of a practitioner: only 5% of VCs are responsible for 95% of the returns generated across the asset class.
“It’s like very extreme,” he told Israel. “It literally means that there’s like 5% of VCs that actually know what they’re talking about and the rest are like severely underperforming for LPs.”
What makes this uncomfortable, in Hurwitz’s framing, is not the underperformance itself. It is the visibility of the underperformers. Armed with LinkedIn profiles and podcast invitations, severely underperforming VCs “act like thought leaders,” he said, dispensing advice that confuses founders who cannot distinguish signal from noise.
His prescription: listen only to the ones who make money. Everyone else is generating content, not returns.
A Simpler Model
Hurwitz’s proposed alternative is elegant in its simplicity. Strip venture capital of its multi-stage complexity. Reimagine the early-stage investor purely as an accelerator, a concentrated, hands-on partner that takes a company from founding through initial product-market fit, funded by a single check rather than a relay of stage-specific funds.
Once the company is ready, hand it to private equity. Let PE optimize and exit. Remove the misaligned middle, the Series A and B investors whose incentives sit awkwardly between the scrappiness of seed and the discipline of late-stage growth.
“You don’t do VC serious and seed and then a VC comes in series A and then a VC that usually does serious A series B. They’re not aligned. It’s all a mess,” he told Israel.
Whether the market moves in that direction is another matter. But as a diagnostic, the argument is hard to dismiss. The handoffs between funding stages are friction points, and friction, in any system, is where value leaks out.
