This article was originally published on Barron's here. The author is our Managing Partner, SC Moatti. In venture capital, the assumption used to be that to survive against the likes of Sequoia and the Vision Fund, funds need to get big. Really big. We’d see funds with $100-500 million under management trying to balloon to $1 billion and up. It was a winner-take-all game that only worked for the biggest investors, and sometimes doesn’t even work for them. But today, smaller VC investors are finding new ways to win. Funds built on blockchain ecosystems are providing transparency to entrepreneurs and liquidity to investors. Community-driven funds are thriving on their strong, viable networks, apprenticeship, and learning. And instead of trying to find the next unicorn, smaller VCs are looking for the “unicorn adjacent.” For example, consider WeWork. To date they’ve raised $12.8 billion. SoftBank ’s Vision Fund alone has invested $4.4 billion and is in talks to invest $2 billion more. What happens if you write a small investment check in that kind of atmosphere? Your returns get diluted. And when a large investor swoops in, they set conditions to protect their investment, often at the expense of smaller, early investors. If an exit happens, the big investor gets paid first, and the smaller fish get the leftovers. There’s also a valid argument that these bottomless war chests inflate valuation. Don’t get me wrong, WeWork is a great opportunity—but smart, smaller VCs approach it laterally. Smaller funds should scan for companies that will be acquired by WeWork. And it is likely that firms like WeWork will have to go shopping. What will they buy and at what price? Products That Count, a networks of product managers I founded, recently conducted a survey about the strategic buying appetite of companies in the “Product Stack” in 2019. The Product Stack is the segment of companies that help product managers build great products, from a market research company, to a visualization company, to even a co-working space like WeWork. Nearly a quarter of surveyed companies are targeting acquisitions at >$100M valuations. This is 8X more than companies in the tech sector at large, according to CapitalIQ. This study confirms that large Product Stack companies and unicorns like WeWork are looking to scoop up more startups and at higher prices. Why? Because the huge expectations placed by the Vision Fund is going to force WeWork to grow faster than it could with organic growth only. WeWork will need to make acquisition to satisfy the demands of demographics, geography, new technology, and so on. And our survey indicates that it will likely be willing to pay a premium to buy smaller players, like Canopy, a high-end version of WeWork, or The Assembly, a women-only version. What does that mean for VCs? Instead of looking for the unicorn, keen investors that understand the space will look for its offspring. VC funds will be taking a much closer look at companies with a high probability of being acquired. They will realize that trying to keep pace with or feed the mega-funds doesn’t make sense. Instead, small to mid-sized funds will adopt an alternate strategy to benefit from the situation at hand. In the past, if a VC firm didn’t invest in Uber, they felt left out. However, it’s become nearly impossible to remain competitive in the go-big-or-go-home scenarios. It’s no longer a winner-take-all market. Right now, the pie looks big enough for everyone. Still, the economy will eventually tighten up, and the big players will keep taking larger slices of the pie. The insightful, agile, lateral looking investor, however, has plenty of room to move and grow into the future. For the shrewd venture investor, new strategies—ones that leverage inherent ecosystem value —make the most sense.