The fund model dominates venture capital—but it’s not the only way.
A traditional venture fund operates on a simple premise: raise a pool of capital, deploy it across a portfolio of startups over a defined period, and generate a return distributed across all investors in the fund. The underlying logic is probabilistic. Back enough companies, and the mathematics of outliers will do the work.
That model has produced real returns. It has also produced real distortions, in how capital gets deployed, in how founders get supported, and in what investors actually own when they commit to a fund.
At Paligan, we operate differently. Not as a contrarian position, but because the deal-by-deal model solves problems that the fund model structurally cannot.
What the Fund Model Actually Requires
To understand why the alternative matters, it helps to be precise about what the fund model demands of its participants.
An LP committing to a blind-pool fund is making a decision without knowing what they are investing in. They are backing a manager's judgment across a portfolio that does not yet exist, over a timeline that extends a decade or more, with limited ability to influence individual decisions along the way. The exposure is diversified by design. So is the accountability.
For the manager, the fund creates deployment pressure. Capital raised must be put to work within a defined window. That pressure does not always produce better decisions. It produces decisions made on schedule, which is a different thing.
The result is a model where speed is rewarded, selectivity is structurally difficult, and the individual investment matters less than the aggregate bet. For managers with strong judgment and genuine conviction, this is a constraint. For those without it, it is a cover.
What the Deal-by-Deal Model Changes
Paligan structures each investment through its own SPV. Co-investors participate in specific opportunities, not in a pooled strategy. The decision to invest is made deal by deal, with full visibility into what is being backed and why.
This changes several things at once.
There is no cross-subsidisation. A weak deal does not get carried by a strong one. Each investment stands on its own, which means the standard for proceeding is necessarily higher. There is no portfolio math to fall back on.
There is no deployment pressure. We have no obligation to put capital to work on a schedule. We invest when a deal passes through our lens, and we pass when it does not, regardless of how long that takes. The pipeline does not create the conviction.
And there is transparency. Co-investors know exactly what they are in, on what terms, and with what structure. The information asymmetry that characterises LP participation in a fund does not exist here.
What This Means for Co-Investors
For the investors who participate alongside Paligan, the proposition is specific. Each opportunity is presented on its own merits, with the diligence and structuring that has gone into it visible rather than implicit. The decision to participate is active, not passive.
That requires more engagement than writing a cheque into a fund and waiting. It also produces something the fund model rarely offers: a direct relationship with a discrete investment, with clear terms and a clear rationale.
The investors who find this model most compelling are typically those who have enough sophistication to evaluate individual opportunities and enough conviction to make discrete decisions. They are not looking for diversification through volume. They are looking for access to specific deals, structured well, with a manager who has done the work.
The Standard That Makes It Work
A deal-by-deal model is only as good as the discipline behind it. Without the structure of a fund mandate, the constraint has to come from somewhere else. At Paligan, it comes from the investment process itself.
Every deal undergoes the same analysis regardless of how compelling the initial impression is. Business model, unit economics, market structure, founder dynamics, cap table history, exit pathways. We go deep before we commit, because there is no portfolio construction logic to compensate for a deal that was not thoroughly understood.
That standard does not make the model slower. It makes it selective. The deals we bring to co-investors are the ones that passed through a rigorous process, not the ones that needed to be deployed before a quarter ended.
Closing
The fund model persists because it scales. It allows managers to raise large pools of capital, deploy them efficiently, and generate fees along the way. Those are real advantages, for the manager.
For investors and founders, the calculus is different. Visibility, alignment, and genuine conviction per investment are things the fund model trades away in exchange for the benefits of scale.
The deal-by-deal model gives them back. That is why we built Paligan around it, and why it remains the clearest expression of how we think capital should be put to work.
