The Topology of Capital

How the monetary substrate shapes capital allocation

This essay maps the invisible terrain—the topology of capital—tracing how the monetary substrate shapes which forms of value rise to dominance: narrative in risk-on regimes, substance in risk-off regimes.

Inspired by what I learned at TERMINAL NYC, it builds on the realization that venture doesn’t operate on fundamentals alone—capital flows through symbolic channels. The topology described here is not physical but semiotic, constructed entirely by signal, narratives, and hyperstitional belief.

Prologue: The Seepage

Abu Al Naft, a wily Kiwi whose moniker precedes him, roamed the Arabian Peninsula in the Roaring Twenties with little more than instinct and a compass in hand. The Hadar of Manama humored his near-evangelical conviction: that a sea of oil lay beneath the basin.

Fueled by that vision, Abu set his sights on persuading Sheikh Isa bin Ali Al Khalifa, then ruler of Bahrain—a small inlet island nestled in the Persian Gulf—to grant him the first concession to survey the territory for liquid gold.

He knelt in silence beside dunes of bleached gypsum, spotting dark patches across the iridescent sand, laced with the faint stench of sulfur. The salt domes served not only as backrests during aeolian nights, but as desert cathedrals: monuments doubling as testaments to his feverish belief—omens of treasure just beneath the surface.

Backed by the capital-restrained Eastern and General Syndicate—a British speculative outfit with little more than paper and optimism—Abu secured his claim through narrative alone. But by the time he clinched the concession, the British economy had shifted into a risk-off regime.

Desperate to fulfill his vision, he sold the rights to American oil major SoCal—still brimming with late-cycle exuberance—who acquired Holmes’s concession through a Canadian proxy.

The Great Depression struck the following year. Markets collapsed, but with capital and infrastructure already deployed, SoCal—operating on sunk cost logic—carried on.

Two years into the expedition, they struck oil at Prosperity Well No. 1, nestled in Jebel Dukhan on the western flank of Bahrain.

The well lived up to its name, kicking off the first oil boom in the Gulf—and reorienting the future of the region.

Point of Ingress: Beyond the Threshold

Attending TERMINAL NYC was a gut check. Turns out my instinct is clocked in. Roberts and James sketched the topography of venture capital, tracing a line from the Global Financial Crisis through the rise of Andreessen Horowitz and the ‘YCification’ of pre-seed.

Bryce Roberts—longtime seed investor and co-founder of Indie.vc—demystified the game for us. He pointed to the ‘arbitrage play’ that had become in-vogue during the ZIRP era of venture capital.

'Fundraising is the business model,' he proclaimed, as an eerie silence fell over the audience.

His delivery was effervescent, like someone who’d already mapped the territory—its hyperstitional apogees and liquidity nadirs—and now took quiet pleasure in watching others trace the same contours in real time. I gawked.

From my point of ingress, the topography of venture capital appears lithic, orogenic, and aeolian—metaphors that serve to show how it is forced into form by capital, risk, and narrative, in that order.

The venture capitalist thrives in this environment, mapping legibility onto chaotic terrain—converting disorientation into opportunity Is it any wonder they’re revered? Iconoclastic? Polemic?

In venture, subversion doesn't obscure—it reveals. Transgression orientates; aberration designs.

The VC is an emblematic compass—perhaps even a North Star. They show the way, an ode to the ‘great man theory.’

I find a lot in common with their mischief turned discovery. It’s enviable, I’ll admit. I grow beside myself now. There are no more thresholds to jaunt, and my eyes are open. What remains is the trek—and the distance to the interior.

The Baudrillardian Valley

As the discussion unfolded, the broader narrative focused on venture’s ‘meta-game,’ or as I came to understand it: a structural layer embedded in its symbolic terrain.

To my surprise, it paralleled many of the concepts I explored in The Abstracted Self—particularly how mediated reality (life through screens) compels performativity as a way to territorialize the sociopsychic reservoir and siphon social capital.

The throughline? The map is Baudrillardian coded. Venture lauds the symbolic over the productive. Semiotics warp liquidity the way light collapses into the spacetime well.

Attendees left convinced: this terrain is navigated through symbolic calculus, where the primacy of sign-value eclipses fundamentals.

Bryce and Reggie elaborated on the ‘YCification’ of pre-seed. The accelerator codified a set of ‘investor protocols’—pattern-matching heuristics and performative legibility that mapped founder performance to the untapped narrative seepages where capital was most likely to pool.

YC’s business model was framed not as traditional venture capital, but as a meta-layer arbitrage engine—built to emphasize narrative-driven, sign-value approaches to fundraising.

If capital is nested within a reservoir, YC’s engine is the oil rig—making legible the paths to liquidity, enabling founders and investors alike to systematically extract downstream outcomes and cash out stakes for millions.

The Visible Fold

The cadence is percussive: cutting small checks, chasing fast markups, and surging at Series A. The playbook still rules. Memes, stories, vibes—all collapsed into a sign-value calculus with a single aim: selling your startup for millions.

When asked why this particular arbitrage—usually short-lived—hasn’t tapped out, Bryce shrugs: “There’s just so much money.”

Investors keep spinning the same narrative-driven game because capital surges like a geyser—pressurized by deployment mandates, speculation, and the lure of explosive upside.

But here’s the thing: players aren’t betting on productive outcomes, they’re tracing markups. A meme startup doesn’t have to work; it just has to raise. They know this. They’re rational agents in a high-leverage, low-accountability game.

Beyond the fold, we peer into how the terrain shifts in real time. Cluely’s $5.3 million seed round is less about product validation and more a sign of lingering ZIRP-era capital. Venture funds banked a record $300 billion from 2021–22 vintages, and that cash is still on the clock. GPs must deploy it before their investment windows slam shut—even as multiples compress.

Abstract Ventures and Susa Ventures—Cluely’s backers—like many firms, park idle dollars in narrative-driven, 'meme-ready' startups led by hyperstitional entrepreneurs: quick to mark up, easy to flip, rarely built to last.

And with the recent a16z raise, the startup is starting to look more like a memecoin long into a generational short—akin to MBS in the lead-up to the 2008 crisis: high narrative liquidity, sketchy fundamentals.

The Monetary Substrate

To Roberts’ credit, he concedes that the meta-game layer, despite its penchant for channeling liquidity, hasn’t yielded much fruit.

And the data shows: just 36% of SaaS startups that raised seed rounds in 2021 made it to Series A, while the 2022 cohort is barely tracking at 20%.

On the exit front, U.S. VC-backed tech IPOs collapsed 87% from 157 in 2021 to just 20 in 2022 and, even with a modest rebound, Q1 2025 has seen only 59 debuts raising $8.9 billion in total.

For more than a decade, VC funds were underwritten in a zero-rate macro regime. But in 2025, those same vehicles are operating in a world marked by 5%+ Treasury yields, higher opportunity costs, and skittish LPs. Despite record dry powder, most firms are dragging their feet on capital calls.

Take a16z: Crypto Fund IV raised $4.5 billion in 2022, but public comments suggest that as little as 16% had been deployed by Q1 2024—indicating that even dominant players are reluctant to commit in this environment.

LPs are retreating en masse: 79% skipped re-ups in 2024, and 88% expect to do the same in 2025. Distributions-to-paid-in (DPI) ratios are stuck around 9% for 2021 vintage funds, leaving allocators overexposed and thirsty for liquidity. Capital flight is targeting safer bets —like 5% risk-free Treasuries or 9–11% private credit. 

Venture now demands a credible path to 20%+ net IRR. The rest? They’re taking a long walk off a short pier.

The Baudrillardian Valley settles along fault lines tethered to its monetary substrate. The Federal Reserve interest rate largely determines whether capital flows track symbolic drift—or orient back toward productive fundamentals.

Realpolitik is the Bedrock

Is venture capital at risk of becoming the proverbial boiling frog? Or are we just watching the cycle play out, as narrative-driven ventures—propped up by symbolic inertia—fall by the wayside while the market reasserts its discipline?

LPs and GPs are rational actors, forever seeking alpha (read: arbitrage). They aren’t incentivized by productive outcomes or positive externalities, but by returns. The modus operandi is simple: capital gains by any means.

When liquidity is abundant and capital is cheap, performative legibility becomes strategy. Hype cycles aren’t aberrations—they’re endogenous to venture’s substrate. Productive outcomes are incidental at best, irrelevant at worst.

In a risk-on regime, visibility outweighs viability. Capital is drawn toward memetic signals, not fundamentals. That shift—from productive to symbolic capital—has defined the ZIRP era.

But tides are turning. In 2025, the macro terrain is hardening. Multiples are compressing. The exit channels are eroding.

Founders and firms who took root in softer sediment must now reckon with the return of discipline—or risk structural obsolescence.

Soft Ventures vs Hard Ventures

When liquidity flows, capital streams toward short-cycle bets and fast markups. Soft ventures flourished: narrative-heavy SaaS wrappers, AI-themed pitch decks, and accelerator cohorts optimized for optics over output.

These ventures require minimal capex, promise rapid follow-on rounds, and let VCs recycle cash at speed. Because perception—not fundamentals—set the price, they thrived in an era shaped more by momentum and legibility, not durability.

When rates climb and the spice no longer flows, capital seeks higher ground. Investors pivot toward durability over hype—toward ventures anchored in physics, regulation, and infrastructural mass: energy storage, defense tech, semiconductors, climate hardware. In other words: ‘boring tech’.

Hard ventures force recalcitrance, a return to base. Technology readiness levels, regulatory thresholds, and contractual milestones act as fractional limits, disciplining narrative drift.

In this setting, capital flows to ventures that resist performativity and anchor durable value in the real economy.

The pattern points to a deeper truth: venture capital (The Baudrillardian Valley) isn’t static—it’s a function of its monetary substrate. When rates are low, simulacra thrive; when they rise, only substance survives.

Soft ventures sit downstream of this epistemic liquidity; their worth corresponds to sign-value and investability—functions of performative legibility.

Hard ventures, by contrast, demand conviction and commitment. Their value unfolds through execution, not exposure. They resist legibility drift. They impose friction on the narrative.

Epistemics and Macro Shapes Capital Flows

If the Federal Reserve pushes rates back below 3 % by 2026, expect Baudrillardian-coded soft ventures to catalyze. Valuation markups will return, YC-style narrative arbitrage dominates Demo Days, and capital will once again flood meme startups, engineered for performative legibility.

In that scenario, the fastest movers win. Firms that raise opportunity funds and lock in early secondary exits cash out first—because signal and spectacle outrank substance.

If the Fed sticks to a higher-for-longer stance—holding rates in the 4–5% range—capital allocations will remain discerning. Expect a barbell effect: fewer deals overall, but larger checks funneled into deep-tech plays like defense, energy infrastructure, and semiconductors.

LPs drawn to private credit and other yield-bearing plays will demand more than momentum. Hard ventures—grounded in engineering, policy milestones, and real cash flows—re-emerge as the focal point. 

Of note, capital flows aren’t shaped by macro alone —they’re contoured by epistemology. Monetary policy doesn’t just reprice assets; it dictates what the market reads as legible, credible, and valuable. The ZIRP-era regime privileged simulacra: narrative over substance, legibility over resilience.

In this way, Federal Reserve rates function as a dial for allocator ontology. Near zero, reality turns hyperstitional. Raise it, and the world reasserts its weight—demanding proof, grounding narrative in real performance, collapsing speculation back into bounded materiality.

As the monetary substrate hardens, the topology of capital warps; how will capital flow once the narrative channels run dry?

A New Framework for Venture Capital

In this essay’s opening, I sketched the apparent topology of Venture Capital as lithic, orogenic, and aeolian.

But the terrain isn’t shaped by seismological events—it’s shaped by semiotics. Its contours are cast by an active agent: the venture capitalist. In the ZIRP era, hyperstitionality became the dominant ontological force, bending capital flows through narrative alone. These actors didn’t just interpret the map; they authored it—conjuring value through symbolic fluency alone.

The archetype of venture capitalist seems to defy the laws binding the rest of us. Such figures scale their own Mount Olympus—not by obedience, but by defiance. 

Plenty of you grew up on this archetype—maybe even idolized it. But what if their genius was less a personal trait than a macro artifact? 

The venture capitalist—long bathed in heroic, even mythic light—may be no more Übermensch than the rest of us. Maybe the only thing separating myth from movement is the courage to begin.

But to begin, you need a map before you enter the gauntlet.

With the ZIRP-era terrain eroded, the map must be redrawn. The next move is clear: resurvey the field and draft a thesis that re-prices reality—one that reads the hardened topology as it now stands.

To navigate this shift, we need a framework that trades myth for method—mapping venture dynamics across three core axes:

• soft ↔ hard ventures

• risk-on ↔ risk-off regimes

• symbolic ↔ productive capital

These axes will serve as legends on the topology of capital—tools to help new entrants faithfully navigate a terrain where narrative often eclipses fundamentals, and where capital flows are shaped as much by epistemology as by macro conditions.

In the wake of ZIRP, the landscape is shifting: new contours are being forged—hardened by recalcitrance, layered in basalt and obsidian. Founders who can read this terrain and traverse its formations will define the next ascent.