The great bifurcation
Why builders should choose specialists over supermarkets
The venture capital landscape is splitting into two distinct camps, and the choice you make as a builder will define your company's trajectory more than you might think.
On one side, we have the emerging Supermarkets: massive venture firms racing toward $100+ billion in assets under management (AUM), offering everything under one roof. They often invest at high volume, sometimes in competing companies, waiting to see which startups show enough promise to pay more attention to at later stages.
On the other hand, we have the Specialists. These focused firms specialize in industry, size, and stage–enabling them to focus on one company per category and put the full weight of the firm behind each.
At N47, we believe that the latter yields the most fruitful builder/investor relationships and, ultimately, the most success for the company.
Our portfolio companies have seen the differences in these approaches first-hand, and chose their investors accordingly:
“N47 is unique in that they actually add value. Most investors will add money, many investors actually interfere with company building; N47 is the polar opposite of that.”
- Renen Hallak, Founder & CEO, VAST Data
Understanding this bifurcation and choosing the right partner at the right time could be the difference between success and becoming just another option bet.
How we got here
Venture firms were once specialists, focusing on early-stage companies and managing single-digit billions. This discipline reflected the limited number of truly outstanding annual opportunities.
That world no longer exists.
Between 2019 and 2024, North American venture capital assets under management doubled, reaching $1.31 trillion. This period also saw a significant concentration of capital: in 2024, just 30 VC firms accounted for 75% of all capital raised by U.S. venture firms. Concurrently, the number of active investors experienced a sharp decline, plummeting by 38% in the first three quarters of 2023 alone. This represents a fundamental transformation wherein capital is increasingly concentrating in fewer, larger hands.
The largest firms have become supermarkets, with the largest now managing $85+ billion in assets. These numbers would have been unthinkable a decade ago.
Here's the problem: while the venture category has grown, the growth in AUM at these firms has dramatically outpaced the secular growth in truly outstanding opportunities. There are still only so many companies each year that can achieve the kind of scale these supermarkets require.
University endowments, foundations, and pension funds, traditionally limited partners, are currently overexposed to illiquid venture holdings. Major university endowments have nearly 40% of their assets allocated to private equity and are now discussing selling billions in fund stakes on the secondary market. They are discovering that illiquid venture positions are trading at unappealing valuations, such as 68% of Net Asset Value (NAV) in 2023. This is a consequence of exit outflows failing to keep pace with the high level of inflows over the past few years.
The supermarkets have continued their growth largely through access to sovereign wealth funds that have entered venture, particularly around the AI narrative. This has created enormous pools of capital seeking deployment, regardless of whether there are enough quality opportunities to justify the scale.
The two winning models
What emerges from this dynamic is clear: there are only two winning firm models going forward.
The Supermarkets will cover every stage, geography, and sector with sub-funds and sub-teams, racking up enormous management fees along the way. Their pitch sounds compelling: "We have everything you need under one roof." It's not unlike Walmart, where you can get a haircut, buy fertilizer for your lawn, and stock your fridge with milk and pasta.
The Specialists will pick one area where they're going to be the very best, giving discerning builders a clear reason to choose them. They'll go deep rather than broad, developing genuine expertise and conviction in their chosen domain.
The middle ground (traditional generalist venture investors) is disappearing. Many are trying to position themselves as smaller supermarkets, but their fate is sealed, much like main street businesses when Walmart entered their communities.
Why supermarkets sound good but aren't
While the concept of a one-stop-shop sounds attractive in theory, the reality is that a jack of all trades is master of none. When you're building something that matters, "good enough" across many dimensions rarely beats "exceptional" in the areas that count.
The fundamental issue is alignment. When you take money from a supermarket early, you need to understand that you're an option bet to them. They cannot commit the focused time and resources you need because you don't matter yet. Your success isn't make-or-break for their fund performance.
Even worse, the person making the investment often cannot influence their colleagues to support you in your next round, which creates adverse signaling. And since you're just one of many bets, if a competitor pulls ahead and starts raising significant capital, they're likely to back that competitor to justify their AUM and management fees.
The case for specialists
In your company's formative days, high levels of attention make a decisive difference. The ability to provide specific, sector-focused guidance, serve as a knowledgeable sounding board for critical pivots, and help you achieve both product-market fit and product-to-go-to-market fit are areas where specialists shine.
When your product is showing early signals but still needs refinement, when user feedback requires careful interpretation, when hiring your first key people matters enormously, this is where specialist expertise becomes invaluable. A specialist investor who deeply understands your space can be the difference between breakthrough and breakdown.
Specialist funds statistically deliver better outcomes for startups. PitchBook's analysis of two decades of VC returns shows that smaller specialist funds earned an IRR of ~15%, compared to ~11% for larger generalist funds, demonstrating that specialists don't just sound helpful – they are.
The beautiful irony is that once your success becomes obvious, the supermarkets will make a beeline to your door with tons of cash at attractive terms. That's when their model works for you: you need capital, they need deployment, and the power dynamic has shifted in your favor.
How N47 thinks about this
At N47, we've clearly chosen to be specialists. We invest only in early-stage enterprise companies that have shipped working products and are showing real signals. We understand deeply the categories we invest in because we've lived through countless cycles of companies that have built, shipped, scaled, and yes, sometimes failed.
It's in recognizing when your product speaks, when an early build doesn't just work but reveals something deeper about the future you're creating. Our focus is on securing customers and building revenue momentum as you develop your go-to-market strategy, and helping make the one or two key leadership hires that put you on a growth trajectory.
“N47’s insight, advice, and connections have helped drive substantial success and growth of our enterprise business. Their long-term outlook makes them excellent counsel, and our board member from N47 has been my first call in many critical moments.”
- Adam Bry, Co-Founder & CEO, Skydio
We're not trying to be everything to everyone. We're trying to be exactly what builders need at the moment when conviction meets execution and when the threads of something bigger start to form.
Remember: the best builders understand that the right partner at the right time isn't just about capital. It's about finding people who see what you see, who can help you navigate the space between instinct and evidence, and who are genuinely aligned with your success.
Choose accordingly. Specialists first, supermarkets later. Your future self will thank you.
