Getting off the Alphabet Train

Every new founder learns the fundraising alphabet: raise a seed round, then move to Series A, B, C, and beyond. This has been the dominant fundraising track for years – and for good reasons. Capital needs are predictable at each stage. Clear milestones help attract press buzz and talent. And in an era of abundant capital companies can delay profitability in pursuit of unicorn-style hypergrowth.

But the game is changing. Market shifts and cheaper software are opening new fundraising paths. And this time, it’s not unicorns leading the charge. It’s elephants.

🚂 Chugging Along

The alphabet model endures because it’s self-reinforcing. 

Here’s how it works: seed funds pass deals to Series A funds, which mark them up at higher valuations. Series A funds then pass them to Series B funds, which mark them up again. Each markup boosts everyone’s apparent success — at least on paper. 

But this “markup train” often leads to overvalued companies focused on fundraising rather than building sustainable businesses.

This system also pushes venture funds toward “hot” sectors that attract the next round of funding, even if it means abandoning bold, innovative investments for whatever seems safe or trendy at the time. General Partners (GPs) need strong paper gains to convince Limited Partners (LPs) they’re good at picking winners, so they pressure portfolio companies to chase higher valuations, even when it’s not best for the business.

Meanwhile, this approach often overlooks the most successful companies, like KiwiCo, which raised less than $10M and has since generated $1B+ in lifetime revenue – simply because it was able to use its own revenue to fuel further growth (as opposed to more VC funding). Without additional rounds, there’s no paper markup — but KiwiCo has discreetly been crushing it. Its success stems from competing in a less sexy edtech market that investors often ignore, a founder who always prioritized profitability and A+ execution, and VC partners like Josh Kopelman at First Round who celebrate this approach. 

Other high profile examples of companies who raised minimal (if any!) VC dollars and instead focused on using their revenue to generate growth: GitHub, Patagonia, Zappos, Shopify, Basecamp, Mailchimp, Notion, etc. And they were all able to do this because of their obsessive communities and strong organic growth at their core (also known as elephant companies).

🛤️ Cracks in the Track

Plenty of young companies have had success on the alphabet train. But they’re increasingly being knocked off the track by three key risk factors: 

1. Market Vulnerability: Companies become dangerously exposed to market shifts and investor sentiment. A startup with minimal revenue might easily raise a seed round during good times, only to face Series A investors demanding significant revenue when market conditions worsen. A down round at any point can trigger negative signaling, torpedoing their prospects. And if their sector falls out of favor, even a small valuation drop can scare away future funding.

2. Rigid Milestone Expectations: Founders get trapped in a "grow or die" mentality, chasing artificial growth targets that don't match business realities and forcing impossible choices between keeping customers happy and satisfying investors hungry for hockey-stick growth. The pressure to hit these metrics also drives decisions that hurt long-term sustainability. Rather than addressing actual business challenges, many founders find themselves massaging numbers to present a story of exponential growth. The focus shifts from building a sustainable business to crafting the perfect narrative for the next funding round.

3. Continuous Dilution: Each new funding round chips away at founder and employee ownership stakes. In a Medium piece, Bryce Roberts from indie.vc provides an example in which "a founder selling at the Series D price of $210M, would make the same amount of money at exit as they would have if they’d sold for $38M after having only raised a seed." What starts as meaningful equity often becomes a sliver after multiple rounds, making potential exits less lucrative for the team that built the company. 

These problems point to a fundamental flaw: the current system values fundraising prowess over business fundamentals. Companies become better at raising money than building healthy businesses, while innovative firms that grow sustainably without constant fundraising can appear less successful according to traditional metrics. 

This misalignment needs to change. The recent failures of heavily funded startups like Bowery Farming and Forward Health—which raised hundreds of millions before ceasing operations—show how this misalignment can end in disaster. Contrast that to KiwiCo, which prioritized smart, sustainable growth over endless rounds of fundraising.

🚦 Changing Signals

But the startup landscape is transforming. Technological advances and harsh market lessons point to permanent changes in how companies are built and funded.

First, software commoditization is dramatically changing the economics of building companies. Cloud infrastructure, open-source tools, no-code platforms, and AI are making it realistic to grow sustainably without massive venture rounds. As AI agents and tools take over time-consuming jobs like marketing, customer support, and coding, it's likely the next generation of billion-dollar companies will operate with far leaner teams (even Sam Altman predicts there will soon be a $1B, one-person company). And since payroll typically represents a startup's largest expense, this will continue to slash capital requirements – forcing founders to question whether to raise any VC at all.

These cost savings are already reshaping the funding journey. Many startups still need early capital to prove their concept. But as companies can reach profitability faster, they won’t need massive growth rounds to scale. This will render traditional growth-stage investors less relevant outside of uniquely capital-intensive sectors like deep tech, biotech, and CPG.

The recent bear market has also been a reality check. According to Carta, over 40% of the VC funds that launched since 2018 have not made a single distribution. VCs struggled to raise funds as their LPs faced a triple bind: no IPO exits, frozen liquidity, and overallocation to existing investments. This sent founders – accustomed to abundant capital from 2020-2022 – into a funding desert. VCs, meanwhile, saw their “too big to fail” portfolio companies collapse under the weight of murky milestones and ridiculous valuations. Employees too learned painful lessons about paper wealth as their stock options crashed in value. 

The lesson is clear: valuations are fleeting, but profitability endures. And while much of the venture industry clings to outdated models, the market is desperate for a new approach. 

🐘 Path of the Elephant

Charging into this new ecosystem is the elephant, a new breed of startup defined by three key traits: 

1. Turning customers into dedicated members

2. Leading with mission and purpose

3. Earning trust by building in public

After years of watching startups on the alphabet train be hurled off the tracks, these  elephant companies are laying down new rails. They recognize that not everyone needs to become a unicorn overnight. Rather than chasing flashy metrics to impress the next investor, they are prioritizing thoughtful scaling through long-term value creation, unit economics, and stakeholder relationships.

This doesn't mean thinking small. In fact, we believe some of these companies will eventually be worth even more than traditional unicorns as truly generational businesses. 

To accomplish this, some founders are taking early stage capital from alternative investors (e.g., family offices, angels, and philosophically-aligned VCs like our fund, Park Rangers Capital) as opposed to more traditional VCs trained on the alphabet model. But they’re also raising directly from community members themselves. Customer relationships are the beating heart of elephant startups. So companies like Beehiiv, Replit, Mercury, and Carry reserve space in their rounds for users to invest. This reduces VC dependency while strengthening community bonds. Raising money in this way does more than just develop products, it grows movements.

👣 A Growing Footprint

The alphabet train had its time. But investors still chugging along the old track risk being left behind. A new model is emerging as elephant companies grow with purpose, powered by community rather than just capital.

Park Rangers Capital exists to back this next generation of elephants. And now, we’re actively writing checks and empowering the best founders to build the next great generational companies. If you’re growing something like this, we would love to meet you.