The Broken Venture Capital System - Lessons From the Front Lines
Venture capital is broken. It promises innovation and growth but is fundamentally designed for failure.
I’ve seen this system’s flaws up close—scaling a unicorn like VIPKID, founding Speakia, and later as a venture capitalist. The realization didn’t come through theory but from personal experience, and it has reshaped how I think about funding startups.
The Illusion of Unicorns
When I joined VIPKID as employee #6, the company epitomized the venture capital dream. We raised over a billion dollars, scaled to dominate the global online education space, and became a unicorn almost overnight. On paper, it was perfect: hyper-growth, massive valuations, and international acclaim.
But under the surface, profitability eluded us. We were locked into the VC playbook—chasing growth at all costs, prioritizing top-line numbers over sustainability. It wasn’t until I had left the company that I fully understood the fragility of the model. When the Chinese government outlawed private education in 2021, VIPKID and countless other companies lost their market and their funding overnight.
Watching from the sidelines, I saw how easily an entire ecosystem could collapse when external factors change. But at the time, I hadn’t yet internalized the lesson: when the unexpected happens, funders run for the hills.
The Startup That Ran Out of Time
That lesson hit home during my time as the Founder and CEO of Speakia. Speakia was everything a startup should be: a product with excellent retention, loyal users, and metrics that surpassed industry benchmarks. But we were a venture-backed company, which meant we lived and died by the fundraising timeline.
In 2022, we were in the middle of raising a funding round when regulatory changes in China sent shockwaves through the market. Investors, already skittish, disappeared overnight. We had a few months of runway left, but no amount of traction or great metrics could save us on a VC timeline.
It was a painful wake-up call: venture capital isn’t built to support founders through uncertainty. When the world changes, the money dries up, leaving founders with no choice but to cut, sell, or close.
https://www.smartcompany.com.au/startupsmart/edtech-chatterize-funding-chatbot-china/
The Venture Capital Playbook
After Speakia’s acquisition, I joined the world of venture capital as an industry-agnostic investor, eager to bring my founder-first mindset into the world of venture capital. Instead, I encountered a system that operates on cold probabilities.
Venture capitalists don’t use data to fund traction; they use emotions to fund spectulation and drive hope.
The strategy is simple: build a portfolio of 20–30 companies, expecting most to fail. The goal is for one or two to generate returns large enough to offset the losses. But here’s the catch: most investments aren’t based on data or sustainable growth. They’re based on emotion, FOMO (fear of missing out), and narratives that promise the next billion-dollar exit.
This approach isn’t just inefficient—it’s cruel. Founders pour their hearts and souls into businesses, only to realize that they were always intended to be sacrifices on the altar of a VC’s portfolio math.
The Pandemic Boom and Bust
The funding frenzy of 2020 and 2021 laid this bare. Flush with cash, VCs funneled billions into startups at inflated valuations, many with no clear path to profitability. It seemed like a golden era for innovation.
But as the market cooled post-COVID, the cracks began to show. Startups ran out of money. Layoffs swept through the tech industry. Many of those same VCs, once desperate to get into deals, disappeared, leaving founders scrambling.
A New Vision for Venture Capital
The system is broken, but it doesn’t have to stay that way. Founders deserve more than a model designed to expect their failure. Startups with traction and profitability deserve funding, even if they don’t promise billion-dollar exits.
That’s why I started Founder VC. Instead of chasing unicorns, we focus on startups with $300M–$500M exit potential—real businesses with proven product-market fit, sustainable growth, and clear paths to M&A.
We use data, not gut feelings, to identify opportunities. And we invest with the intention of building sustainable value, not just rolling the dice and hoping for a win.
It’s time to rewrite the rules of venture capital. Founders, investors, and the ecosystem as a whole deserve a system built on trust, sustainability, and results—not just hype.
Founder VC transforms high-risk startups into viable investments of time and capital, delivering sustainable value for both founders and investors.
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Lane Litz is a proven startup founder, operator, and venture capitalist with a track record of building, scaling, and investing in high-potential startups. As employee #6 at VIPKID, she helped grow the company to a $3B valuation. Later, as the CEO and Co-founder of Speakia, she navigated challenging market conditions to lead the startup to acquisition. Her time in venture capital gave her a front-row seat to the systemic flaws in traditional VC, inspiring her to found Founder VC. Now, Lane is reshaping the venture landscape with a founder-first approach, focusing on sustainable investments that deliver measurable value for both founders and investors.