DDQ: Founders, Fraud & ‘Fake It Till You Make It’

Mar 25, 2026

They debate rising founder misconduct and how weak governance and storytelling cultures enable risky behavior. They map five enterprise AI adoption paths and whether big SaaS will survive vertical AI newcomers. They explain accelerating GP-led secondaries, data on continuation vehicles, and liquidity pressures. They argue which fund tiers will drive innovation and whether to back first-time managers based on learning velocity and soft skills.

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ADVICE

Expect More GP Led Secondaries Soon

Avoid passive portfolio monitoring; expect GPs to seek liquidity via GP-led secondaries as patience wanes.
Earnest Sweat notes VCs are taking life into their own hands to create DPI through continuation deals.

INSIGHT

Secondary Market Has Repriced And Liquidity Mechanisms Shift

Secondary market pricing improved in 2025 with average offers now ~78% of NAV for VC, higher for late-stage names, driving strip sales and continuation vehicles.
Alexa Binns cites Jefferies and Wellington data showing AI mega deals concentrated a third of activity and strip sales speeding liquidity.

INSIGHT

Venture Splitting Into Three Survival Tiers

Venture is fragmenting into three tiers: mega, middle (≈$300M–$1.5B), and small funds, each with different survival dynamics.
Earnest Sweat relays Brendan Baker's framework where megafunds persist by inertia, middles must differentiate, and smalls drive innovation but are unstable.

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This week on Swimming with Allocators, it’s time for another discuss, debate, and question (DDQ) episode as Earnest and Alexa riff on founders behaving badly and the cultural and governance failures enabling fraud-like behavior, then dive into how enterprises will actually adopt AI and what that means for the future of SaaS and vertical software. They unpack the rise of GP-led secondaries, strip sales, and mounting impatience around liquidity, using recent market data to explain why secondary activity is accelerating. The conversation shifts to Brendan Baker’s three-tier venture framework (mega, middle, and small funds), where they debate where innovation, desperation, and real differentiation will come from. They explore whether LPs should back first-time fund managers without a traditional track record, what “track record” should really mean, and why softer skills, pattern recognition, and learning velocity matter. They also discuss treating fundraisers like enterprise B2B sales, how to qualify LPs and build authentic GP–LP relationships, and close with a playful “start, bench, cut” on SpaceX, OpenAI, and Anthropic to frame how they think about pre-IPO AI and space bets.

Highlights from this week’s conversation include:

Prediction: 2026 as the Year of Founders Behaving Badly (1:16)
Misuse of Startup Funds and Rise in Legal Issues (1:48)
Narrative-Driven Investing and Weak Governance in VC (2:28)
Enterprise AI Adoption: Rory O’Driscoll’s Five Paths (3:25)
Will Big SaaS Survive the “SaaS Apocalypse”? (5:43)
LP Liquidity Pressure and GP-Led Secondaries (9:19)
Data on Secondary Pricing, Continuation Vehicles, and Strip Sales (12:04)
Venture Splitting into Mega, Middle, and Small Funds (15:26)
Desperation, Differentiation, and Innovation Across Fund Sizes (17:52)
Should LPs Back First-Time Fund Managers Without a Track Record? (21:41)
Learning Velocity, Curiosity, Kindness, and Willingness to Schlep (24:49)
The Value of Apprenticeship and Seeing Portfolios Over Time (25:50)
Game: Start, Bench, Cut – SpaceX, OpenAI, Anthropic (30:16)
One Question to Ask a First-Time Fund Manager (34:32)
Signs of Strong GP–LP Fit: Informal Contact and Vulnerability (36:48)
Closing Remarks and Episode Wrap-Up (37:40)

Swimming with Allocators is a podcast that dives into the intriguing world of Venture Capital from an LP (Limited Partner) perspective. Hosts Alexa Binns and Earnest Sweat are seasoned professionals who have donned various hats in the VC ecosystem. Each episode, we explore where the future opportunities lie in the VC landscape with insights from top LPs on their investment strategies and industry experts shedding light on emerging trends and technologies.

The information provided on this podcast does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this podcast are for general informational purposes only.

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