NGILA: In venture capital, the story matters more than the numbers

The statistics are secondary. A founder who eloquently describes his vision to change the landscape of his field or a fund manager who sells the opportunity to be in the presence of such a game-changer will, without fail, trump a dull presentation of numbers

To attract customers, be it in a venture fund or in a startup, a story must be created to which no one will be able to say no. To be involved in a good story, one that inspires and captures the hearts of humanity’s drive, dreams, and yearning to change the world is what sparks the essence of investors’ interests.

If you listen to the people in venture capital, you’ll realise that they consider themselves to be a mix of financial tacticians, analysts with a sense for details, and creative entrepreneurs. Let us get real for a moment: whether it is a startup or a fund, the process of raising capital is way less about the figures on the spreadsheet and much more about making a narrative, a brand and instilling FOMO. 

Unfortunately, a great number of the leading funds in the world such as Sequoia, Andreessen Horowitz, NEA have even failed to post returns of 1x on their latest vintages. However, somehow their rounds manage to get heavily oversubscribed within the shortest time frame. How come? Because the real issue is not the cash – it is the narrative.

The myth of outsized returns

For years, venture capital was always sold off as the asset to hold if one wanted to take some risk along with the hope of making higher returns. The whole idea of making early bets in the likes of Apple, Google or Facebook gave the top funds this aura that transcended failure for them. 

As is becoming apparent as we peel away the curtain there is a lot of hype. The reality is that the majority of VC funds take decades to return equalized capital if at all. Many fail to beat the stock markets as well, and reported returns for some of the bestselling names even come in lower than the expectations.

Investors continue to line up. Why? Not because they have gone over the numbers with a fine-tooth comb. It’s because fund management by marquee VCs elevates one’s status. It provides a glimpse into the backroom, high caliber founders and a tacit agreement of more opportunities down the road. In a nutshell, it is about who manages the fund, not who contributed to it.

Selling the dream

To attract customers, be it in a venture fund or in a startup, a story must be created to which no one will be able to say no. To be involved in a good story, one that inspires and captures the hearts of humanity’s drive, dreams, and yearning to change the world is what sparks the essence of investors’ interests. 

The statistics are secondary. A founder who eloquently describes his vision to change the landscape of his field or a fund manager who sells the opportunity to be in the presence of such a game-changer will, without fail, trump a dull presentation of numbers.

Fundraising is not so much about being able to demonstrate expected returns as it is about managing the investor’s perceptions. When an investor hears about backing, let’s say, Andreessen or Sequoia, the underlying assumption provides a spark that sets off a series of reactions. 

The last thing one would want to be is the one who fails to grab a unicorn out there simply because they were slow in making a decision. Also, in the same vein, when a top fund begins a new fundraising campaign, all those (limited partners) LPs who are already in the fund raise a momentum which pushes other LPs to go for it as well.

It’s all about FOMO

The saying goes, if you snooze, you lose, and this is a mantra that most fundraisers live by; fomo is real, and there is no better time than now to capitalize on the exclusivity that is established. 

This is precisely why scarcity is deployed as a weapon in the VC arsenal. Scarcity is artificially manufactured by fund managers, for instance by putting a limit on rounds, not sharing deals with many investors, or inviting many subscribers to an already full fund offering. A startup or fund does not necessarily need to have the most convincing metrics, if they can persuade their stakeholders that everybody else has already been on board.

This dynamic is made worse by the fact that VC is fast turning into a badge of honor. Wealthy individuals and institutional LPs are equally talented magpies as they quite love the prestige that comes with being investors in top notch funds even when there are not many realistic returns from behind the funds.

Building around people, not ideas

One of the most overlooked facts in the field of venture capital is that other stakeholders are the pivot points upon which victory lies. The best performing funds do not limit themselves to selling their portfolios only — they sell the people behind those portfolios. 

It is not about the portfolio strategies or the funds, be it an inspiring founding chief executive or a star VC, large quantities of resources play a disproportionate amount of Goldilocks in a person’s ideas.

The halo effect from big names cuts across the board. When investors see big names going around and signing checks, they feel more comfortable. It is not about the vision. They subscribe to a network instead. A self-validating mechanism with little relevance to the actual returns.

Need for transparency 

This is not to mean that marketing and FOMO are the evils of the 21st century. They are tools within the enablement of commercial objectives that every fund or founder has pretensions of achieving. But the situation currently brings about some ethical and moral dilemmas in the conduct of investor relations in the venture capital business. 

Are there any guidelines on how far the LPs can be taken by a fund’s past performance and future promise? How do we encourage investors to embrace good communication without their attention being directed towards the storytelling aspect leaving out the importance of delivering tangible results?

Venture firms mustwork to try and ensure that they do these two things in equal measure – raising capital and deploying it to generate returns. Yes, there is a great emphasis on ensuring that the narrative is well developed, it is the very essence that attracts the right investors. 

However, it is the other side of the coin that also brings a lot of relevance, the need to substantiate that narrative. Especially in the African tech ecosystem, where dollars are always in short supply, and so $1 has to work even more. That places a high degree of emphasis on achieving actual, rather than merely paper, returns.

As VC evolves beyond 2025, the emphasis on marketing and FOMO will likely persist—because it works. But if we truly want to build a sustainable and impactful ecosystem, we must move beyond the hype.

It’s time to celebrate not just who’s in the fund, but what the fund is achieving. Let’s focus on the real value being created, not just the perceived value being marketed. After all, the true measure of success isn’t how many people want in—it’s how much impact you deliver.

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