By Serafina Lalany

When I started building venture infrastructure in the American Heartland, it often felt like we were playing a different sport. A decade ago, venture was still treated as a coastal language. If you were building in Arkansas, Texas, or across much of the Midwest, you could be doing everything right and still feel invisible.

I’ve spent my career working to change that. Not by copying Silicon Valley, but by building something that fits our home turf: closer to real industries, closer to operators, and designed for early-stage founders who are not interested in spending six months fundraising for a maybe.

In 2026, with venture capital dominated by mega-funds and a bigger-is-better mindset, I’m more convinced than ever that staying small and early is not a sentimental choice. It’s a strategic one.

Just a note: Before I dive in, I want to acknowledge the stress and uncertainty many across our broader Heartland community are experiencing. My thoughts are with everyone impacted, as we hope for healing and a peaceful resolution.

Venture Capital (as we’ve known it) is dead

The venture capital industry I’m operating in today barely resembles the one I entered. At the extremes, it’s thriving. In the middle, it’s thinner.

One end of the barbell is made up of mega-funds that can write enormous checks and play the highest-stakes version of the power law. The other end is made up of smaller, focused funds that can win by owning a category early, staying close to founders, and keeping their own incentives aligned.

The middle ground has gotten harder. Mid-sized generalists have fewer natural advantages. They are often too big to be truly nimble, and too small to compete on platform, brand, or sheer access.

LP behavior has shifted with this. When the market was frothy, “good enough” performance was often tolerated because everything felt up and to the right. Now, LPs are paying attention to cash returns again. DPI matters. Real liquidity matters. A paper mark means little if it never turns into an outcome.

Many big institutional LPs have doubled down on a small number of brand-name relationships. Part of it is practical. It’s easier to write one $100M check than ten $10M checks. No one gets fired for buying IBM, after all. That logic is understandable. It’s also one of the reasons the barbell has become so pronounced.

That’s part of why the new fundraising environment feels so concentrated. Some LPs are consolidating toward the biggest platforms. Others are selectively backing specialists. Fewer are spreading commitments across the middle just to have exposure.

What’s been interesting is that scale hasn’t translated cleanly into performance. Despite controlling a meaningful share of fundraising, the mega-funds have not consistently delivered commensurate returns. Deploying billions can make it harder to stay ahead of the next curve. Meanwhile, many sub-$100M funds are quietly posting stronger IRRs and returning capital faster (!!). That gap is getting harder to ignore. The excesses of the late 2010s and the correction in the early 2020s taught LPs a painful lesson: paper marks and unicorn headlines aren’t liquidity. In 2026, you can feel the sobriety. If you’re an emerging manager or a thoughtful LP, you can feel this in the air.

Zigging when everyone else zags

The pressure to scale is real. I’ve felt it directly in conversations with people who mean well.

Why not raise more? Why not “graduate” to later stage? Why not build a bigger machine? It’s tempting. Bigger funds come with bigger fees, bigger headlines, and the perception of bigger impact.

They also come with a different job.

When a fund gets large enough, deployment becomes its own constraint. You start making decisions based on check size. A $2M check stops being interesting. A $100M exit becomes irrelevant to your model. The day-to-day becomes less about founder outcomes and more about capital allocation at scale.

Staying small keeps the incentives cleaner.

A $50M to $75M fund focused on pre-seed and seed can do things a $1B fund simply can’t:

• Spend real time with founders without it being performative
• Take early bets that look tiny to a large fund but compound beautifully over time
• Care deeply about $50M to $300M outcomes, which can be excellent returns and life-changing for founders

It is not painless. It means turning down capital that doesn’t fit. It means accepting that some people will always view early-stage and regional focus as “less ambitious.”

But I’ve watched what happens when early-stage investors chase scale. They often drift. They do fewer true seed deals. They lose proximity to the founders and markets that made them good in the first place. They start optimizing for the machine.

That’s not the game I want to play.

Betting on Overlooked Markets and Emerging Managers

There’s a saying: “If you want non-obvious returns, look in non-obvious places.” The Heartland used to be a non-obvious place for venture. Not anymore. Nearly one-third of all early-stage venture deals in the U.S. are now happening in the Heartland, a seismic shift from just a few years ago. In real terms, that means the next groundbreaking fintech or AI startup might just as easily come from Kansas City or Nashville as from Palo Alto.

The coastal giants are aware, but they’re not built for this terrain. This is where those of us on the ground have an edge. We live in these communities. We spot the talented founders bubbling up in the local university, or the second-time founder who moved home from Seattle to be near family. We understand context that an airplane VC visit can’t capture. And we’re betting big on these founders long before the coastal funds decide to pay attention.

I’ve also chosen to back and collaborate with emerging managers who share this philosophy. Many of the most exciting investors I know aren’t running billion-dollar funds. They’re small teams raising a first or second fund focused on a niche or a region. They might be a former operator who knows supply chain tech in the Midwest, or an angel syndicate in Atlanta that sees the strongest SaaS founders in the Southeast. These managers bring hustle and real domain depth. Just as importantly, their incentives tend to be simpler. They win when their founders win, and that creates a tighter feedback loop and a more founder-aligned posture from day one. When we co-invest with managers like this, it’s usually because they’ve earned the right to have conviction early, not because they have the biggest platform.

Building something different

I often describe what we’re doing here as an experiment in building something different. Different from the chase for unicorns at all costs, or the cookie-cutter funds that all flock to the same “hot” sectors and sandboxes.

By doubling down on the Heartland, on small funds, on overlooked founders and emerging managers, I believe we can build a venture ecosystem that is more resilient, more human, and frankly more fun.

It’s a system where a high-growth startup can take root in a small city and not have to relocate for lack of capital. Where a new fund manager with a fresh perspective can find backing, even if they’re not a Stanford alum with a Sand Hill Road address. Where LPs can come to us and co-create strategies that are a world away from the crowded trades of the mega-funds, and get rewarded for it both financially and in the pride of having built something, not just ridden a wave.

I’m not naive; I know this approach is still a minority one. But it’s gaining momentum. The Heartland’s slice of the venture pie is growing, and the more success stories we generate, the more talent and capital will continue to flow in our direction.

We have an opportunity here not just to ride a trend, but to architect a new normal. One where trust and long-term partnership trump quick flips, where doing right by founders isn’t at odds with fiduciary duty. It enhances it. For those of you reading: especially fellow investors, LPs, or ecosystem builders who feel disillusioned with how homogenous and hype-driven venture has become, know that you’re not alone. There is another path.

I’ve met brilliant small fund GPs in cities like Memphis and Madison, I’ve worked with corporate LPs in “flyover” states who are far more progressive in their thinking than coastal pensions, and I’ve seen how a tight-knit regional network can outperform a thousand loose connections in a crowded market.

The future of venture doesn’t have to be all mega-funds and monopoly games. It can be distributed, inclusive, and grounded in the regions and people that traditional venture forgot.

So, what’s next? For me, it’s staying the course, continuing to refine this model, to learn, and to prove that our bets on the underappreciated will keep paying off.

And I’d invite you to join me in whatever capacity makes sense.

If you’re an LP who’s tired of being a tiny fish in a huge fund and want to actually engage with the investments you make, let’s talk.

If you’re an emerging manager feeling the temptation to chase the big fund dream but whose heart says to keep it personal and focused, I see you,  let’s compare notes.

If you’re a founder in an overlooked market, know that there are investors out here who will back you with conviction and not ask you to move to SF.

We’re building something different in the Heartland, and we’re just getting started. It’s grounded, it’s contrarian, and it’s born of real experience, scars and all.

And the door is wide open for collaborators and fellow travelers.

In a world obsessed with going big, we’re proving that sometimes staying small and true can unlock outsized impact.

If that resonates with you, I encourage you to reach out, keep in touch, or even come visit and see it first-hand.

 

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