Oct 5, 2026, 10:00 AM ETInterview, Fireside Chat

Can You Still Win in Venture Without a $1BN Fund? Menlo’s Venky Ganesan on the New Rules of VC

Menlo Ventures is currently pursuing an aggressive "grand slam" strategy, aiming to participate in defining AI companies with a "buy everything" mindset.
The firm acknowledges the market has shifted from traditional venture to a landscape where pre-seed and seed rounds often exceed $100 million, with some Neo Labs seeking billions.
Venky Ramachandran states that for Menlo, "there is no limit to what a person can do as long as you don't care who gets the credit."
The firm views early-stage seed investments as "option bets" to identify outliers, reserving significant position sizing for companies with quantitative evidence of traction and revenue.
Menlo is willing to accept low ownership stakes (e.g., less than 2% in Anthropic) in exchange for the opportunity to size up later, prioritizing the "money movement game" over the "ownership game" for proven outliers.
The firm has allocated up to 20% of its fund to a single company (Anthropic), a decision driven by data-backed conviction rather than initial ownership percentage.
Menlo 9 (raised 2001) and Menlo 10 (raised 2004) were larger funds ($1.5B and $1.2B respectively) that underperformed, leading to LP departures, though the firm has since stabilized with public sector anchors like the Washington State Investment Board.

Ramachandran cites a 90% loss on Avonex stock in the 2000s as a critical lesson that "at some point you should take some chips off the table," though he notes this advice is context-dependent on an investor's financial situation.
The firm argues that venture returns are increasingly asymmetric, where the most expensive mistakes are deals passed rather than deals made, necessitating high conviction participation.
Ramachandran warns against relying on "downside protection" from strategic acquirers, noting that acquisitions of failed companies often exclude investor returns ("screwing the investors").
The interview highlights that metrics are increasingly gamed during booms; for example, "Net Revenue Retention" can be artificially inflated by splitting large POs into smaller increments to boost the percentage.
Menlo distinguishes between capital that adds value ("build with me" investors) and "dumb money," preferring to invest in founders who focus on terminal value rather than valuation markups.
The firm believes that while AI companies are growing at unprecedented speeds (e.g., scaling to $100M ARR in under two years), this velocity may not be sustainable long-term.
Ramachandran advises that LPs should focus on "DPI" (Distributed to Investors) rather than TVPI, noting that delivering cash returns makes raising subsequent funds easier.

The VC industry faces a structural challenge where $30M–$100M funds struggle to deploy capital effectively in a market dominated by larger checks and "max 7" participants (NVIDIA, hyperscalers, foundational models) in every portfolio.
Ramachandran argues that private equity-backed SaaS companies from the 2021 cycle face higher risks of "zombie" status due to lack of majority control, whereas PE firms can actively restructure their portfolio companies.
The firm anticipates an increase in M&A activity as regulatory regimes ease and public tech giants (e.g., AMD, Meta, NVIDIA) seek AI capabilities via acquisition.
Menlo has not invested in OpenAI due to a "two-way commitment" culture, choosing to stay with Anthropic to maintain a deep, aligned partnership with the founder.
Ramachandran observes that "capital allocation" is the superior skill for scaled founders, as it inherently encompasses product vision and resource deployment decisions.
The firm notes that dilution is a critical variable in venture returns, with typical portfolio ownership shrinking from 10% at seed to 3-4% at exit due to financing and option pool expansion.

Menlo prioritizes the founding team's DNA, asking founders how their closest friends would describe them in three words to gauge self-awareness and external perception.
Ramachandran values founders who can communicate complex concepts simply, citing Sean Parker's insight into virality and network effects as a prime example of this trait.
The firm emphasizes "velocity" in business growth, as faster value appreciation reduces dilution and improves IRR by shortening the capital deployment timeline.
Ramachandran believes that money reveals rather than changes character, noting that "A players" remain motivated by the game even when wealthy, while others may opt out.
The firm has a cultural preference for working with public sector pension funds, viewing it as an extension of their humble origins and a way to serve "parents" rather than just children.
Ramachandran suggests emerging managers with small funds ($30M-$100M) face significant headwinds unless they can secure early access to rounds or possess exceptional grit to out-hustle competitors.

Ramachandran advises LPs to look at the "windshield, not the rearview mirror," recommending that LPs survey successful entrepreneurs to identify which VC partners they respect and would reinvest with.
He warns that the current "bubble" in AI valuation and round sizes is likely a snapshot in time and may correct as the market matures or cycles turn.
The firm believes that time diversification (vintage diversity) remains crucial for LPs to mitigate the risk of deploying capital in a short, high-pressure window (e.g., Menlo 8's 10-month deployment in 2000-2001).
Ramachandran predicts that housing affordability in tech hubs like the Bay Area will worsen due to a supply-side constraint (NIMBYism) rather than a lack of demand.
He suggests that while AI offers massive opportunities, the "right thing" is often the "hard thing," and investors must avoid ego-driven negotiations that compromise deal economics.
The firm maintains that "being in the company" is better than "not being in the company," even with low initial ownership, to retain the option to scale up during the outlier phase.