VC vs. PE
Right after finishing my military service, I hadn't yet seriously considered my career path. One day, almost by accident, I joined a business club (SBA) and had a chance to meet a senior who had just finished his six-year journey at BCG. When he asked me what career I hoped for, I boldly answered, "I don't know yet." He paused for a moment, looked closely at me, and said, "You have the face of a VC." I had no idea what that meant, but intrigued, I started researching it thoroughly. That's how I first got fascinated by venture capital, wondering how I might find a way to work in this appealing field.
The venture capital scene in the United States, arguably the birthplace of VC investing, has clear, standardized paths. Roughly half are former Wall Street professionals, and the other half are founders-turned-investors. Given my non-technical, humanities-based background, starting a company seemed out of reach. Thus, I chose finance as my route into VC, landing my first internship at a private equity-like firm, Equis Development. Naturally, I became deeply interested in private equity as well, frequently visiting financial news sites like The Bell. However, I soon realized that the skill set required for effective venture investing is quite distinct from what makes an effective investment analyst in IB or PE. After all, forecasting financial statements doesn't exactly align with what early-stage startups need.
Private equity typically invests in companies already generating profits, using valuation discounts, leveraged buyouts, and operational improvements post-investment. PE investments are fundamentally driven by current financial performance and stability, making them essentially value-based.
In contrast, venture capital bets on future potential. The startup might currently have zero customers, zero revenue, or perhaps even no fully formed team. However, if there's a clearly defined problem, a fresh approach to solving it, and a deeply committed founder, a VC can still invest. To me, the essence of venture capital lies precisely in transforming something previously seen as unprofitable into something valuable. It's not simply about risk-taking; it’s about finding meaning in the vision and logic that justify that risk.
But lately, I feel that the VC industry is becoming increasingly similar to private equity.
In recent venture markets, VCs are increasingly emphasizing returns, proven business models, and predictable follow-on financing. Several factors contribute to this trend, but I mainly see three:
First, the inflation of fund size (AUM inflation). Just ten years ago, a 10 billion won fund (~$10 million) was considered large. Today, venture funds commonly manage hundreds of billions or even over a trillion won. With larger funds, ticket sizes inevitably grow, pushing VCs toward investing in more proven, later-stage companies with clearer follow-on funding prospects. Fund size inflation doesn't merely shift investment targets; it transforms how VC firms operate entirely. Larger funds require greater liquidity and more predictable exit strategies, prompting firms like Lightspeed Venture Partners to register as RIAs (Registered Investment Advisers), adopting secondary investments, continuation funds, and roll-up strategies. These methods are more characteristic of PE than traditional venture capital.
Second, there's a trend of deal sourcing becoming increasingly financialized. As professionals from IB and PE backgrounds enter VC, investment analysis and data-driven evaluations intensify. While this trend has positives, excessive reliance on quantitative analysis can sideline fundamental aspects like founder insights or unique problem-solving approaches. With RIA registration enabling investments across a wider spectrum, including secondary market transactions and structured asset deals, narrative-driven early-stage investments inevitably diminish.
Lastly, there’s increased active management toward exit strategies. Many VCs now follow a clear path from equity investment to operational involvement, then guiding subsequent financing rounds toward IPO or acquisition. Though VCs might not explicitly take control, they are increasingly influencing founders' decisions and shaping exit strategies, sometimes directly intervening in operations. For instance, General Catalyst, a prominent U.S. VC, recently acquired Ohio-based hospital chain Summa Health, actively restructuring its operational model. Though termed "mission-driven investing," this resembles PE’s hands-on management approach.
I believe venture capitalists should be among the first responders to problems the world throws into the open. Yet, as the market grows, VCs are increasingly using automatic filters based on revenue, total addressable market (TAM), or daily active users (DAU). Consequently, startups must now speak the language of PE to attract investment, diluting VC's original purpose. While adopting PE strategies like Lightspeed or General Catalyst might enhance exit opportunities and strategic flexibility, it simultaneously reduces investment in teams that haven't yet begun, founders without products, and fundamentally important but seemingly irrational ideas. Yet, I believe VC should always play the role of first supporter for such seemingly irrational market opportunities.
PE identifies and refines "already good businesses." VC, however, discovers businesses before they even become businesses. VC doesn't analyze whether something is already successful; it imagines, constructs, and nurtures future potential. In that sense, VC isn't just a supplier of capital—it's a rare mechanism capable of pointing toward a market direction before it even emerges. This is why I'm concerned about venture funds gradually adopting PE characteristics. Although I understand the pressure for stable returns, I worry this trend dilutes VC's unique role. Thus, I wish for VC to remain authentically itself in three key areas:
First, I hope fund sizes don't grow excessively. Larger funds naturally focus on larger ticket sizes, decreasing their willingness or ability to invest in truly early-stage companies.
Second, VCs should not pursue control of the companies they invest in. Investors increasingly acquire large stakes or even dominate boards, shifting power away from founders. Prominent VC firms like Founders Fund explicitly avoid managerial interference, acknowledging that the strongest teams don't thrive under such pressures.
Third, I want to reconsider the reliance on the criterion of predictable follow-on rounds. Excessive emphasis on immediate revenues or assured subsequent funding inevitably filters out genuine early-stage ventures with groundbreaking yet unproven ideas.
If I ever run my own fund, I hope to become the kind of investor who responds with capital even to untested, unconventional ideas—as long as their possibility genuinely convinces me. My investment philosophy will stand on three core principles:
Courage to invest without existing customers or immediate revenue. Truly early-stage investors should back teams based solely on their problem definition, insight, and commitment.
Reducing obsession with immediate market size predictions. Rather than precise current TAM calculations, I prefer understanding why a market should exist, why existing solutions fail, and why a team's insights matter.
Smaller AUM and higher density. Managing smaller funds allows deeper involvement with each portfolio company, nurturing genuine partnerships rather than mere financial relationships.
Yes, LPs expect returns. But more critical than simply the size of returns is how those returns are generated—the quality and repeatability of investment success. LPs increasingly seek venture funds for their unique potential for outsized, asymmetric returns. Venture capital inherently offers a "right-tail upside" that PE-style structures typically can't match. Prominent early-stage funds like First Round Capital, Uncork Capital, or Initialized manage relatively small AUMs and consistently deliver exceptional returns. These funds maintain a strong identity as true early-stage investors, and their LPs fully understand and support that vision.
Startups inherently take risks, and when that risk stems not merely from uncertainty about growth but because "no one has tried this before," I believe those are precisely the risks we must support. True VC shouldn't merely pursue predictable profits but should channel capital toward possibilities that could reshape entire markets.
VC is one of the few capital forms capable of responding boldly to questions the world hasn't yet answered. I hope VC reclaims its original spirit—as investors who extend a helping hand precisely when founders feel most alone. Our role is to ensure capital flows not only into ventures that clearly promise financial returns but into ideas and solutions that fundamentally need to succeed, even if their profitability initially appears uncertain. I believe that's how VC re-energizes the broader social engine: by enabling courage, promoting truly transformative ideas, and never forgetting that the world still needs genuine ventures.
Best,
Bosung
Infrastructure
Throughout human history, resources have been used for two main purposes: survival and sustainability. To survive each day, we need bread on our tables, homes to live in, and clothes to keep us warm. These basic needs drove humanity to evolve. For example, hunting turned into livestock breeding, and gathering developed into organized farming. Farms grew larger, reservoirs were constructed, and harvested crops were stored to sustain populations over longer periods. Small communities eventually formed towns, where marketplaces became central hubs for communication and trade. People built roads and railways to transport goods more efficiently. From ancient civilizations to modern societies, we've always invested heavily in infrastructure to create a better and more sustainable life.
At times, we dismantle old infrastructure to make room for improvements. However, today's infrastructure isn't always built with sustainability as its core goal. When people say third-world countries lack infrastructure, they're not just referring to farms or housing. They're pointing out the absence of hospitals for the sick, schools for education, and reliable transportation systems. When emerging economies announce plans to build new cities, it's often less about merely accommodating citizens and more about attracting businesses, entertainment venues, and sports facilities. Infrastructure today often seems designed to attract capital and economic activity as much as to improve the quality of life.
But what about global warming, polluted oceans, and the urgent need for clean energy to support our increasingly technology-driven world? There's already a wealth of information outlining the existential threats to human survival and our planet’s health. Infrastructure intended solely to improve living standards must come second to securing basic human survival. Ironically, despite universal awareness of these threats, we still see insufficient capital flowing into critical areas like renewable energy, biodegradable materials, or innovative vaccines against new viruses. Instead, we continue investing in and operating systems that exacerbate these very threats. Isn’t that ironic?
Historically, clean energy and welfare-focused infrastructure, such as schools and public transportation, have only gained significant momentum when governments offered substantial subsidies. Without generous subsidies, private companies have often avoided investing in these vital areas. Relying on government subsidies is not necessarily problematic, as public funding is crucial to launching projects that might not initially generate substantial profits.
However, it's equally important to focus on making necessary infrastructure economically attractive for private investors. Subsidies alone aren't enough to ensure long-term, sustainable development. We must develop clear economic frameworks and business models so projects related to clean energy, healthcare, education, and public transportation become profitable ventures in their own right. When infrastructure is profitable independently, it naturally attracts more private capital, greatly accelerating progress.
Traditionally, the financial sector’s goal has been to find immediate profit opportunities and exploit them. Banks, investment funds, and private investors have typically focused on efficiency, arbitrage, and short-term returns. However, the financial sector now needs to evolve and take a more active role in shaping society. Financial institutions should aim to structure markets in ways that turn essential sustainable infrastructure into profitable, viable investments. This means banks, private equity, venture capital, and other financial institutions need to rethink their strategies. They should actively build financial environments where investments in sustainability become rewarding both morally and financially.
So why is sustainable infrastructure development progressing so slowly? Two reasons stand out. First, it’s hard for us to recognize the full consequences of environmental damage because the immediate impacts often seem manageable or distant. A slightly hotter summer or more frequent storms feel tolerable in the short term. Oil companies and factories rarely bear the immediate brunt of climate change; instead, the early warning signs appear as sinking islands or threatened wildlife, such as polar bears. By the time the signals become too alarming to ignore, it might already be too late to reverse the damage.
Second, and perhaps more significantly, our economic systems still heavily favor short-term profits over long-term sustainability. If short-term financial gains remain our primary motivation, infrastructure will naturally prioritize immediate returns over lasting environmental stability. Thus, reshaping our financial incentives to align immediate profitability with long-term sustainability is essential.
Ultimately, investing in sustainable infrastructure isn't just an ethical choice; it's a necessary financial strategy for humanity's survival and prosperity. The financial sector must shoulder greater responsibility by strategically channeling private capital toward projects that deliver both profitability and planetary sustainability. This holistic approach, where infrastructure projects are profitable, socially beneficial, and environmentally responsible, is the only meaningful way forward.
Best,
Bosung
Value-driven investing
It's very difficult to define value. The stock price of AAPL could be seen as its value per share because that's what people are currently willing to pay. But this doesn't capture the entire meaning of value. A more accurate definition might be the actual worth of owning one unit of the company. The tricky part is that we only recognize something as valuable when it translates into gains. When AAPL's price rises, we say owning it was valuable. But if you made a profit while AAPL was trading flat, someone else might've lost money. Was any value truly created, or was it simply moved from one person to another?
People invest their money to generate returns higher than their initial amount. The choice of investment depends heavily on one's risk tolerance and desired returns. If you prefer safety and predictable returns, treasury bonds may be your best option. However, if you believe strongly that Apple's future growth justifies potential risk, buying its stock could make sense. But there's another question worth considering: Where does the money come from? Is it savings from your monthly wages? Or perhaps you're borrowing money, betting that your returns will surpass your interest payments? These considerations are at the heart of finance.
As a side note, banks are central to finance. Banks don't directly create value the way a tech firm creates products or a manufacturer builds machinery. Instead, banks primarily transfer value. They take deposits and lend the capital out to individuals and businesses, hoping these borrowers will create tangible value. But for banks, as long as borrowers repay the interest, it doesn't matter much whether the borrowers truly created value. Finance simply operates by transferring capital. Whether something meaningful results from that capital lies in the hands of those who borrow it.
The dictionary definition of investment is the action or process of investing money for profit or material result. However, I think that definition leaves something important out. Profit typically arises from transactions. You buy AAPL at $180, then sell at $220. You made money, sure, but did you directly contribute to Apple's growth or innovation? Likely not. You merely traded your share with someone else who no longer wanted it, and then again with someone else who did. Apple's primary financial gain from investors occurred when it initially offered its shares to the public (IPO). After that, the company's operations were largely funded by its internal revenue streams.
The moment your investment truly creates a material result is when a company explicitly states how your money contributed to building infrastructure, launching a new product, creating jobs, or improving lives. I genuinely believe this is how capital should flow. Yes, stock trading can be profitable, but trading alone doesn't create tangible outcomes. The stock market is merely a platform for exchanging ownership, and the share's price is largely determined by collective market belief, not necessarily by measurable impact. Companies aren't overly concerned with who specifically owns their shares day-to-day; they care that someone owns them, eliminating the need to repurchase their stock.
Everyday trading activity rarely considers the tangible results of investment. Some investors prioritize discounted cash flow valuations, others chase price momentum, and some speculate based on volatility. Yet none of these strategies inherently ensures the company creates genuine welfare or positive societal outcomes. Ultimately, if we fail to address global challenges such as climate change or international conflicts, our short-term profits will hardly matter.
Therefore, let's strive to be responsible investors. Understand clearly where your money goes and what it accomplishes. Continually ask yourself: Has your capital contributed to creating something valuable, or is it simply changing hands for a quick gain? That's why I urge people to invest in values, not merely in assets.
Best,
Bosung