Bradley Tusk, co-founder and managing partner at Tusk Venture Partners, made a bold statement on TechCrunch's Equity podcast, declaring that the traditional venture capital (VC) model is dead and has been for the last four years. Tusk attributed this demise to the lack of returns to limited partners (LPs) in the past four years, citing the current state of the VC landscape.

The VC industry has faced significant challenges in recent years, including higher interest rates, plummeting startup valuations, and a decline in IPO and M&A transactions. Many investors had been hoping for a resurgence in VC activity under President Donald Trump's administration, expecting deregulatory measures and pro-business tax reforms to stimulate growth. However, the uncertainty surrounding Trump's executive orders, trade wars, and dismantling of federal agencies has tempered these expectations.

Tusk's decision to abandon the traditional VC model is a significant shift, especially considering his background in political consulting and regulatory expertise. Instead, he is focusing on an "equity-for-services" model, which allows him to accept equity in exchange for helping startups navigate complex regulatory environments, legislative communications, and government procurement. This approach is not new to Tusk, who has a history of working with startups, including Uber, to create regulatory frameworks for disruptive technologies.

Tusk's experience with Uber dates back to 2010, when the company offered him equity instead of cash for his services. He spent the next few years "running campaigns all over the U.S. to legalize Uber and ride-sharing." This expertise in creating regulatory frameworks for startups has been Tusk's bread and butter for years, earned through previous roles as campaign manager for Michael Bloomberg's 2009 mayoral race and Deputy Governor of Illinois.

For Tusk, the traditional VC model, involving fundraising from LPs, compliance, board seats, and portfolio construction, has become a distraction from the kind of work he loves doing. He believes that the equity-for-services model is a shortcut to doing the work he is passionate about, while also generating more revenue than traditional venture investing.

"When I realized that I could just as easily get on cap tables and get equity from startups that I like in return for my expertise, the traditional model just didn’t make a lot of sense," Tusk explained. He added that he can make more money through the equity-for-services model, as he keeps 100% of the proceeds, whereas in traditional venture investing, he has to return investment capital to investors, repay fees, and give them 80 cents on the dollar.

Tusk Venture Partners will continue to support its existing portfolio companies until the fund's life cycle ends in 2031. This shift in focus marks a significant change in the VC landscape, as investors and startups alike adapt to the new realities of the industry.

The implications of Tusk's declaration are far-reaching, suggesting that the traditional VC model may be in need of a significant overhaul. As the industry continues to evolve, it will be interesting to see how other investors and firms respond to this shift, and what new opportunities and challenges arise from the ashes of the traditional VC model.