Yaniv Feldman of Flag Capital on What Comes After Venture Capital

What we talked about.

In this episode of the Sunny Ray Show, host Sunny Ray talks with Yaniv Feldman of Flag Capital about what comes after the traditional venture capital model. Feldman explains that Flag launched about a year and a half ago in response to AI letting very small teams reach millions in ARR, a pattern that clashes with VC fund math built around returning the whole fund from a few huge outcomes. He argues that misalignment between funds, their LPs, and founders can push companies toward decisions that serve the fund rather than the business. Flag invests at very early stages and aims for faster liquidity through secondaries at up rounds, dividends, and early acquisitions, with the goal of aligning LPs and founders. Feldman also recounts leaving Microsoft in 2008 to start a Hebrew tech media company, describes how a decade in security shaped his habit of looking for what a startup has that others lack, and shares why he believes Israel produces so many startups. He closes by pointing listeners to flag.capital and LinkedIn.

Yaniv Feldman says most AI-era startups will never fit the VC model, and explains how Flag Capital is building an alternative around founder alignment and faster liquidity.

The questions, and the answers.

What is Flag Capital and what problem are you solving?

We started Flag about a year and a half ago because AI is changing how companies are built. Tiny teams are reaching five, ten, even fifty million in ARR, but VC fund math needs huge outcomes. We built a vehicle that supports founders whatever outcome they want, whether dividends, bootstrapping after one round, or a modest sale.

What do you want listeners to take away from this episode?

Not every startup has to go the venture route. Building has become cheap and relatively easy, so technical differentiation matters less. What matters most is the ability to create trust, go to market, and execute. From an early-stage investor, founders should want much more than money.

You left Microsoft in 2008 to start a tech media company. Who did you have to convince?

Plenty of people thought I was mad to leave a high-paying job for a media business. Honestly, I only had to convince myself. I wanted my own thing, I had no strong idea and little network, and I had always written. People said no one would read a Hebrew tech blog, but I did it anyway.

What did a decade in security teach you that still shows up when you look at startups?

I learned to look for the windows and the leaking rooftops rather than the front door. As an investor I apply that in reverse: I look for what a company has that others do not, like execution, resilience, or flexibility. My first call with a founder is about how to make it work.

What was the moment you knew the venture model was broken?

The biggest issue was misalignment between VCs and founders. Say a startup gets a 40 million dollar offer after raising at 20 million, but the fund only sees a small return and blocks it. The founder loses life-changing money. I saw decisions made for the fund rather than for the company or the founder.

How does Flag return money faster than a traditional fund?

People said early-stage liquidity does not exist, so we are trying to create it. We look at selling secondaries at up rounds, using dividends to return capital, and early acquisitions. We invest at valuations like four to eight million, so selling at 30 to 60 million is a great outcome for us.

How many companies still fit the VC model?

I would say roughly 15 to 20 percent of companies being built today are a good fit for the VC model, and around 80 percent probably are not. That is not a bad thing. Many of them can still be successful businesses, just not traditional VC businesses.

What should the rest of the world copy from Israel's startup culture?

A lot of it is mentality. Many Israelis feel that things simply need to work, shaped by army service and our history. That produces audacity and persistence. Our failure rate is probably similar to elsewhere, but many more people try, so the top of the funnel is much bigger.