The Harsh Truth About VC Red Tape — and What It’s Costing You

Venture capital is in crisis. We’re staring at the greatest technological shift in history, yet the industry reeks of laziness and stagnation. Sure, liquidity’s not great, slashing available funds for founders.

But the real killer? Economic jitters that birthed a “herd mentality” — investors are piling into the same deals and only giving capital to founders they know. VCs were meant to level the playing field — rewarding merit, ingenuity and grit. However, in 2025, it has devolved into a commingled piggybank to bankroll technofeudalist ideas from nepo-babies.

Prejudice runs deep, but inflation fears contribute to the rising terror of failure. These fears drive market participants to collude to deliver value to shareholders rather than deriving that value from bets of their own volition. Effectively, modern venture capitalists act no differently than high school mean girls in suits.

Behind the curtain: Gatekeepers exposed

“Iron sharpens iron,” implying that competition brings out the best in one another. The same applies to companies — competition breeds the best product, ultimately maximizing value delivered to end-markets. But as venture markets matured, bureaucracy crept in like a virus. Accelerators and elite programs turn raw, punchy ideas into a badge-collecting game. Want funding? Forget brilliance, stack endorsements.

Ivy League institutions, YCombinator and Forbes 30 Under 30 are a few examples of conglomerates that gatekeep capital — and indirectly — the advancement of mankind. Investors hide behind them as filters for talent when, more often than not, the scrappy, underserved founder mentality lives outside of these bubbles. Outsourcing this diligence quite literally undermines the value of a fund manager in the eyes of shareholders. After all, LPs back managers based on their unique experience and world perspective. That’s like hiring an attorney who outsources to ChatGPT.

Politics isn’t helping. Diversity programs are crumbling, destroying many bridges for non-elite founders. Minority funds are having trouble closing from LPs and big corporations like Target have done away with minority-founder initiatives well before they even took off.

The stats scream inequality: 80% of venture deals close in four states: California, Massachusetts, Texas and New York; 90% of founders are male, 72% white; 65% of unicorns in Europe are repeat founders, deeply constraining access to capital for new ones.

From personal experience, founding a startup is taxing yet exhilirating experiences; however, it’s hardly practical for 99% of people. Ironically, the same fear of loss that bred the bureaucracy amongst fund managers similarly discourages founders outside the bureaucracy from ever starting. It’s one thing to risk failure with a generational safety net; it’s a completely different thing to risk it all without it.

The slow unraveling of initiatives focused on rectifying these disparities undoes much of the “progress” we’ve made over the years. To top it off, no diverse founders means diverse problems go unsolved — leaving both opportunity and money on the table.

Beating bureaucracy: Your battle plan

There’s nothing you can do to change the game; it’s rigged. That said, it’s critical that minority founders do the following to combat — or infiltrate — the bureaucracy.

1. Network intentionally: Investors fund good ideas; they fund people they know with good ideas. Closed mouths don’t get fed, so it’s critical that aspiring founders make concerted efforts to develop a robust set of industry connections through accelerator programs, sponsorships and more. A single referral from the right person can change everything.
2. Learn how it all works by becoming an investor or insider: Learn how the other side evaluates businesses by working in VC (or private markets). Understanding the psychology behind capital provision will only make your future pitches more compelling.
3. Pursue specific career paths and higher education for knowledge and expertise: Titles are cheap, yet they’re always the thing investors point to after a startup fails when questioned about the investment in the first place. In 2025, roughly half of VC firms allocated > 70% of funds to elite-pedigree founders, underscoring how biased capital deployment is in VC. A fancy MBA program may not be in the cards for many, but leveling up in the industry you care to launch a business in only helps.

Conclusion

As a first-time, African-American founder who has raised eight-figures of funding (and actively working on more), I know the game: Bias and prejudice lurk everywhere. If you don’t love and appreciate the chaos, it’ll consume you. Your “why” must be so big that doubt around you trembles in fear. Reclaim your destiny and forge your own path where none exists. As they say, nothing worth having ever comes easy. Minority founders: Push through. The future’s yours to seize.

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Venture capital is in crisis. We’re staring at the greatest technological shift in history, yet the industry reeks of laziness and stagnation. Sure, liquidity’s not great, slashing available funds for founders.

But the real killer? Economic jitters that birthed a “herd mentality” — investors are piling into the same deals and only giving capital to founders they know. VCs were meant to level the playing field — rewarding merit, ingenuity and grit. However, in 2025, it has devolved into a commingled piggybank to bankroll technofeudalist ideas from nepo-babies.