Episode summary
DDQ: Founders, Fraud & ‘Fake It Till You Make It’
Swimming With Allocators
· · Hosts: Alexa Binns, Earnest Sweat
Summary
The hosts argue that venture is entering a period of weaker guardrails, where narrative can outrun substance and founders can more easily slip into fraud-like behavior. One host says a lawyer friend believes 2026 could be “the year of founders behaving badly,” and they connect that to more cash being used for personal expenses, looser governance, and investors rewarding “fake it till you make it” storytelling instead of checks and balances.
They also debate how enterprises will adopt AI. One host frames Rory O’Driscoll’s five paths: buying directly from foundation models, building on top of them, buying native AI companies, sticking with existing software vendors, or buying outcomes from full-stack AI providers. Their view is that adoption will vary by market, but diligence will get harder because investors now need to understand whether a company can actually sell into a given industry and sustain that position.
A large part of the episode focuses on liquidity and venture structure. They discuss the rise of GP-led secondaries, strip sales, and continued pressure for DPI as VCs get impatient with waiting for exits. They then debate Brendan Baker’s three-tier framework for venture firms, concluding that small funds may generate the most innovation while the middle is under the most strain. They finish by questioning what “track record” should mean for first-time managers and by comparing GP-LP relationships to active, bilateral business partnerships rather than formal quarterly updates.
Key takeaways
- The hosts think governance failures and narrative-heavy fundraising could make 2026 a bigger year for founder misconduct.
- They argue enterprise AI adoption will not be one-size-fits-all, and investors must diligence go-to-market fit by industry, not just model quality.
- Secondary activity is accelerating because funds want liquidity sooner, with strip sales and continuation vehicles emerging as the main tools.
- The hosts see small venture funds as the likeliest source of new innovation, while middle-tier firms face the most pressure to differentiate.
- They do not accept the narrow definition of track record and want evidence of learning velocity, curiosity, kindness, and hustle.
- A strong GP-LP relationship looks more like an active partnership, with direct contact and candid advice, than a formal reporting relationship.
Notable quotes
“I think 2026 is going to be the year of founders behaving badly”
“how are enterprises going to adopt technology one are they going to buy it directly”
“our job is going to get harder and harder”
“I think there's more desperation in the middle”
How the episode opens
Welcome to Swimming with Alligators, — The VC podcast from the LP perspective — With your hosts Alexa Bins — And Ernest Sweet. You ready? Let's dive in.
Welcome to another episode of Swimming with Alligators. You have me, Ernest Sweat, and my co-hosts, Alexa Bins. Uh it's your favorite episode series, DDQ's uh which you know stand for discuss, debate, and question where we'll go over things that interest us, things we've learned over the last couple of episodes.
Uh and just generally kind of like our thoughts and everything, venture, technology, lifestyle, the world, all those things, right? Um, I'm definitely hoping to talk about lifestyle and the world. Those are May I pick lifestyle and the world for 500?
What is — Uh, — We we have not shared with each other in advance what we want to discuss and what we want to debate. So, this will be fun. You're all along the ride with us. — Yeah. Um, Alexa, do you want to go first in our discussion?
Sure. Sure. — Cool. Okay, one of my favorite things I have heard offline lately, uh, this is a friend in the legal profession and she said, "I think 2026 is going to be the year of founders behaving badly." — What the the the the beginning or what are we talking about?
I would love to discuss the topic of founders misbehaving. — Wow. Wow. And what was kind of the why did they feel that we have tailwinds for that? — I have to assume it it's it's sort of like political uh I guess guard rails are off. I had been called upon to help find a fellow angel, somebody to represent them because they had a feeling all of the cash for the business was being used for personal expenses.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- founder misconduct
- ai adoption in enterprises
- saas future
- lp liquidity and gp-led secondaries
- venture fund frameworks
Companies and tickers mentioned
- SpaceX
- OpenAI
- Anthropic
Watch the episode
Watch “DDQ: Founders, Fraud & ‘Fake It Till You Make It’” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Swimming With Allocators
Swimming With Allocators, this episode and its artwork belong to Earnest Sweat, Alexa Binns. Octagon is not affiliated with the show; this page is an independent summary.
