Is your venture capital industry quietly leaving billions in economic value on the table?

If you had significant capital to deploy into your innovation ecosystem — and your mandate is to generate maximum economic impact — what should you prioritize: policies and programs that produce more investable founders, or the development of a mature venture funding industry?

The reality is: you need to do both.

If you succeed in producing investable founders while your venture capital ecosystem continues to underperform, you will inevitably lose talent to more mature markets. Even as capital markets globalize at Series A, pre-seed and seed financing remain structurally weak locally. The result is that startups grow slowly until they reach Series A, risking a slower growth trajectory moving forward. This could translate into a lower chance of success to reach Series B and a lower rate of large exits. If you build a robust venture capital ecosystem without sufficient deal flow, you will see capital flow elsewhere.

In both scenarios, ecosystem progress slows — and economic impact falls short. We’ve seen this dynamic play out many times.

If these fundamentals are broadly understood, why do so many national and regional strategies still miss the balance?

A decade into our work, we see a growing number of ecosystems that have made meaningful progress on startup and talent development. The overall quality of programs can always improve, but in many places you now find strong elements of a founder pipeline: university tech transfer initiatives, incubation and acceleration programs, and increasingly intentional efforts to help local talent ideate, start, and scale technology businesses.

Many ecosystem leaders are also becoming more deliberate in designing cohesive founder journeys. In our client work, one effective approach is to work backwards from clearly defined startup growth and economic impact targets. When done well, this creates clarity on what needs to be built — and in what sequence. You cannot reliably nurture hundreds of high-quality startups without designing the full funnel end-to-end.

And yet, when we assess venture capital communities globally, a clear pattern emerges: most have not been developed with the same level of intentionality as the startup communities in which they invest.

In our work, a few recurring issues show up again and again:

1) An unclear definition of “maturity”

Many ecosystem leaders rightly celebrate growth in startup creation, the number of scaleups or unicorns, and year-on-year increases in venture capital deployed domestically. Some also point to strong returns from Fund of Funds structures. These are meaningful outcomes and worth acknowledging. But they do not provide a strategically useful view of the maturity of a local venture capital community: where the system is strong, where it is structurally constrained, and what bottlenecks exist across the funding journey. Absent a clear definition of gaps and present maturity level, it becomes difficult for senior decision-makers to drive consensus and move from celebrating outcomes to designing interventions that further strengthen the venture capital system end-to-end.

2) A missing theory (and toolkit) for change

Even when leaders can identify gaps — by stage, round size, sector, or investor capability — many struggle to translate diagnosis into a practical roadmap. Without the right toolkit, it’s difficult to reverse-engineer interventions that strengthen each layer of the ecosystem in a coordinated way, from pre-seed to growth capital. Policymakers have many possible interventions from which to choose, but these are frequently applied in ways that are suboptimal, or which fail to address the right problem – for example, deploying capital through grants when the real gap is investor expertise. In the months ahead, we’ll explore what it looks like to build venture capital communities with the same intentionality that many regions now apply to talent and founder development — and what that means for long-term economic outcomes.

3) Lack of public sector intentionality

The public sector can play a legitimate, and often catalytic, role beyond capital allocation. In practice, there are dozens of levers through which the public sector can strengthen private market capacity: embedding entrepreneurial finance in business education, professionalizing fund managers, improving early-stage risk absorption, enabling structured knowledge transfer, crowding in experienced operators, and sustaining a pipeline of credible new funds. However, these levers are frequently not designed as part of a coherent system. As a result, progress tends to be incremental and fragmented, driven more by chance than by intent. Governments are often the only actors positioned to invest in system coherence rather than individual outcomes: if they do not actively adopt this role, it is unlikely that any other stakeholder will. This does not imply that governments should replace private investment judgment or attempt to pick winners. Instead, forward-looking governments proactively shape the conditions, capabilities, and incentives under which private capital operates.

All of these points are even more critical in the era of AI-Native startups, as funding requirements and investment behavior have shifted materially in a relatively short period of time. For example, Startup Genome’s data shows that AI-Native startups appear to have quite different funding characteristics than other tech startups. As AI lowers the cost of company formation and accelerates scaling timelines, the speed and quality of early-stage investment judgment becomes more, not less, decisive. AI is compressing funding timelines. Ecosystems without fast, high-quality capital decision-making will fall behind — and the window to build investor literacy is short.

As the startup–VC dynamic evolves, venture ecosystems can’t afford to operate on outdated assumptions. They need to rapidly build literacy around the technological developments unfolding in real time, and adapt how capital is deployed, evaluated, and supported across the full innovation lifecycle. Ecosystems that fail to build this capability risk becoming last resort capital providers rather than partners in value creation.

For ecosystem leaders who are ready to translate economic potential into tangible progress, we’re now implementing a comprehensive toolkit and set of targeted interventions with a small number of selected clients. This work is designed to move beyond diagnosis and toward execution — building the capabilities, incentives, and market infrastructure needed to strengthen venture ecosystem maturity end-to-end. We’re doing this in close partnership with a small group of senior, globally-experienced practitioners who bring deep, hands-on expertise across key venture ecosystem building blocks.