This metaphor draws from one of the OG great blog posts about seed funding written by Josh Kopelman, where he likens choosing seed funding to taking the “local train” or the “express train.”

In Josh’s analogy, the local train was taking money from micro VCs. It allowed for way more exit flexibility early on. The express train was traditional VC funding. There were only a few exit paths, driven by the need for funds to push for multi-hundred million to multi-billion dollar exits.

Fast forward to today and some of these dynamics are similar, but they have been turned up to 11. The local train is gone. The two paths are:

1. The express train

2. The warp zone

The Express Train:

The express train is the typical venture path. It’s an aggressive strategy of raising tens or hundreds of millions of dollars in multiple rounds, and doing so from funds that can do well with exits in the $300M – $3B range. You are shooting big, but not going for broke.

The express train doesn’t make many local stops, but it does stop a few times along the way. There are multiple exit paths available including mid-scale acquisitions, PE buyouts, or smaller scale IPOs.

This is not to say that these companies can’t get huge. Most of the big companies we think of today took this path to greatness and continued to thrive long after their VCs had exited their businesses.

The Warp Zone:

The warp zone is a path charted by megafunds that invest hundreds of millions or billions into companies. These businesses may be excellent, but they go through a significant re-risking with these sorts of rounds.

These funding rounds are sort of a one-way door. Exit options are pretty limited at the valuations and expectations that these rounds assume. You are banking on Snowflake-scale IPOs or Wiz-scale acquisitions. These exist, but they are very few and far between.

These rounds often happen WAY before companies are ready and able to absorb this kind of capital effectively. The earlier these happen, the more misalignment there is between founders, their teams, and investors. Warp zones are perilous for those actually traveling through them.

Here are a couple inconvenient truths, though:

First, it’s not like we’ve had tons of express train-style exits. The last few years have seen PE activity dry up, M&A activity grind to a halt, and small IPOs underperform. If you can’t get off the train, what’s the point of riding?

Second, capital has concentrated into the historically best funds at a dramatic rate. Aren’t the best investors all megafunds now? If you aren’t funded by a16z, Sequoia, Thrive, etc., are you even a good company?

I think both of these are remnants of the last market correction, and we are still living through the consequences. But I think there are reasons to believe that we are not in a “warp zone or bust” kind of world:

1. There are more quality express trains than it seems, with more coming. Firms like USV, Benchmark, CRV, and others have stayed the course. And newer firms that mirror this style of investing are filling the void. Footwork and Chemistry are two that come to mind.

2. The express train is not a one-way door. You can still step into the warp zone at the right time, and hopefully when the risk of doing so is more favorable to existing shareholders and the company is better equipped to handle the huge capital infusion.

3. Intermediate exit options are here to stay. Early investors have more options for liquidity for companies that jump from the express train to the warp zone. Employee secondaries are more common. The paths will be less binary and better understood.

4. A third option is increasingly in vogue – and that’s to just take a fast car. Bootstrapping, or not relying on endless venture dollars, has always been an option, but it’s becoming increasingly supported by certain investors and by the efficiency gains of AI.

The exit environment is still pretty tough and uncertain, on top of the uncertainty of the overall macroeconomy. I can’t predict what will happen here, but I choose to operate with the belief that innovative, durable companies will continue to create massive shareholder value.

The key is to make sure you are durable, and to choose a funding path that does not sacrifice durability for a shaky promise of getting to your destination faster. A world of only warp zones is only good for the warp zone maker.

But that is not the world that we live in.