The harsh reality of needing private tech mafias for survival

This article summarizes an episode of VC10X’s video series featuring Vishal Verma, managing partner of Edgewood Ventures.

Vishal Verma, managing partner of Edgewood Ventures/ Photo credit: Vishal Verma

Silicon Valley runs on hidden relationships that decide who makes money. Vishal Verma, a managing partner at Edgewood Ventures, argues that VC performance depends on access, not investing skill, and that getting a seat at the table is what matters most for long-term success.

The AI boom acts as a magnifying glass for this behavior. Capital and founders cluster in private groups, keeping the biggest returns out of public markets.

Exclusive access and large bets are the product

Understanding this locked network reveals how funds actually operate. Returns look distributed on paper, but the advantage belongs to investors invited to private deals. This reality requires treating funds as access vehicles:

• Measure investment size purely by current market value.
• Accept that capital and founders stick together in closed groups.
• Ignore diversification strategies to hunt the few investments that generate returns.

The true cost of proprietary deal flow
Securing this access comes at a cost. Investors constantly debate the value of paying the standard fee structure. Verma argues this cost is justified only if it buys entry into locked networks. He notes that over 60% of VC is raised by just five funds.

“There’s only one reason why VCs are successful: they have proprietary deal flow,” he argues. “That is the reason I’m willing to invest in them and give my [fees] away.”

Navigating extreme portfolio concentration
Paying these fees changes how portfolios look. A diversified portfolio naturally becomes unbalanced over time as successful companies swallow everything else. This happens because founders command large rounds simply because of their track records.

Verma points out that the vast majority of his private market portfolio is tied up in only six companies, such as The Wiz, Anthropic, xAI, and Stripe. Furthermore, accessing these deals means navigating closed corporate groups.

“There are two or three mafias in Silicon Valley,” Verma explains. “They all are amongst themselves… [and they have] proprietary deal flow.”

Investor plan for keeping access when funds raise money quickly

Navigating these closed groups requires a constant flow of capital. Investors are often forced to keep writing checks just to maintain their position. Keeping access requires treating reinvestment as a mandatory toll to secure future spots. This forces investors to adopt strict survival strategies:

• Reinvest consistently to maintain vital relationships.
• Match investment size to fund velocity to avoid over-committing capital.
• Plan cash reserves expecting falsely inflated private valuations.

Dropping out of a single fund often destroys an investor’s relationship with that firm forever. As funds raise money faster, investors must shrink their check sizes to survive the pace.

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