Why Most VCs Can't Evaluate Infrastructure

Most venture capital firms can't properly evaluate infrastructure companies. Not because they're incompetent, but because their entire framework is built for consumer and enterprise software.

They pattern match to Uber, Airbnb, Salesforce. They look for viral growth, network effects, and land-and-expand sales motions. These patterns don't exist in infrastructure.

The Pattern Matching Problem

VCs are trained to pattern match. They see thousands of pitches. They develop heuristics. Company X looks like early Stripe. Company Y reminds them of Twilio. Pattern matching works when you're investing in categories you understand.

It breaks down in infrastructure.

Infrastructure companies don't follow consumer growth curves. They don't have viral coefficients. They don't have network effects in the traditional sense. They grow through word of mouth among technical communities, not through referral programs or social sharing.

VCs ask the wrong questions because they're using the wrong framework.

The Technical Depth Gap

Most VCs aren't technical. They have MBAs, not CS degrees. They've worked in consulting or banking, not engineering. They can evaluate business models, but they can't evaluate architecture.

This creates a blind spot.

They can't tell the difference between a system that works in a demo and one that works in production. They can't identify technical debt. They can't assess scalability. They can't evaluate security posture. They rely on proxies: team pedigree, reference calls, growth metrics.

These proxies fail in infrastructure.

I've seen VCs invest in payment APIs with fundamental architectural flaws. Database schemas that won't scale. Security vulnerabilities that will cause breaches. Unit economics that don't work. These problems are obvious to operators. They're invisible to investors who can't read code.

The Growth Obsession

VCs are optimized for power law returns. They need companies that can return the entire fund. This creates pressure for explosive growth.

Infrastructure doesn't grow explosively. It grows steadily.

Stripe took years to reach $1B in revenue. Twilio grew methodically. Plaid built integrations one bank at a time. These companies didn't have viral growth. They had sustainable growth built on technical excellence and operational discipline.

VCs see this growth rate and pass. They're looking for companies that can 10x in 18 months. Infrastructure companies that grow that fast usually have unsustainable unit economics or are accumulating technical debt that will explode later.

The Market Size Trap

VCs love large TAMs. They want to invest in companies that can capture 1% of a $100B market. This framework breaks down in infrastructure.

Infrastructure markets are often small initially. The market for payment APIs was tiny when Stripe started. The market for communication APIs was small when Twilio launched. The market for bank data access didn't exist before Plaid created it.

Infrastructure companies often create their markets. They make something possible that wasn't possible before. They turn complex operations into simple APIs. The TAM grows as they build.

VCs who require large existing TAMs miss these opportunities. They pass on companies that will create billion-dollar markets because the market doesn't exist yet.

The Unit Economics Blind Spot

VCs focus on top-line growth. Revenue growth, user growth, transaction growth. They assume unit economics will improve at scale.

In infrastructure, this assumption is often wrong.

Infrastructure costs don't always decrease at scale. Fraud costs increase. Compliance costs increase. Support complexity increases. Some infrastructure businesses have worse unit economics at scale than they did early on.

I've seen this repeatedly. A fintech company raises on strong growth metrics. VCs don't dig into unit economics. The company scales. Fraud costs explode. Compliance burden increases. Support needs multiply. The business that looked profitable at $1M ARR is burning cash at $10M ARR.

Operators see this coming. We model the costs. We understand how they scale. We know which businesses improve margins at scale and which don't. VCs often don't do this work.

The Sales Motion Mismatch

VCs understand enterprise sales. They know how to evaluate sales teams, sales cycles, and customer acquisition costs. They look for repeatable, scalable sales motions.

Infrastructure doesn't sell like enterprise software.

Infrastructure sells through developers. Developers don't respond to cold emails or sales calls. They find tools through documentation, GitHub, Stack Overflow, and word of mouth. They try products themselves before involving procurement.

This creates a different go-to-market motion. Less sales, more developer relations. Less outbound, more inbound. Less demos, more documentation. VCs who expect traditional enterprise sales motions miss companies with strong developer-led growth.

The Competitive Dynamics Misunderstanding

VCs worry about competition. They ask: "What stops Google/AWS/Microsoft from building this?"

This question reveals a misunderstanding of infrastructure competition.

Large companies can build anything. But they can't build everything. They have different priorities, different constraints, different customers. They move slowly. They have legacy systems to maintain. They have enterprise customers who resist change.

Infrastructure startups win by being focused, fast, and developer-friendly. They solve specific problems better than large companies can. They iterate quickly. They provide better support. They integrate with modern stacks.

The threat isn't that AWS will build your product. The threat is that you won't execute well enough to build a defensible position before they notice you exist.

What This Means for Founders

If you're building infrastructure, understand that most VCs won't get it. They'll ask the wrong questions. They'll apply the wrong frameworks. They'll pass for reasons that don't make sense.

Seek investors who understand infrastructure. Who can evaluate technical systems. Who know that sustainable growth beats explosive growth. Who understand unit economics. Who've built infrastructure themselves.

These investors are rare. But they're the ones who will actually help you build a sustainable infrastructure business.

The Opportunity

The fact that most VCs can't evaluate infrastructure creates opportunity. For founders who understand this, it means:

The infrastructure investing landscape is changing. More operator-led funds. More solo GPs with technical backgrounds. More investors who actually understand what they're evaluating.

But the majority of venture capital still doesn't get infrastructure. And that's okay. It creates space for those of us who do.

If you're building infrastructure and want investors who actually understand what you're building, let's talk.