Bradley Tusk, co-founder and managing partner of Tusk Venture Partners, stated in an interview on TechCrunch’s Equity podcast that the traditional venture capital model is no longer viable, a sentiment he has held for the past four years.

Tusk emphasized this point by noting that his firm has not returned any capital to its limited partners in four years, saying, “Maybe there’s some VC that I’ve never heard of that’s awash with liquidity the last couple of years, but we haven’t returned $1 in capital to our LPs in four years.”

The venture capital industry has faced significant challenges over the past few years, including higher interest rates, decreased startup valuations since their peak in 2021, and a slowdown in IPO and M&A activity.

Many investors had anticipated that President Donald Trump’s deregulatory measures and pro-business tax reforms would revitalize the VC landscape. However, the uncertainty surrounding his executive orders, trade wars, and dismantling of federal agencies has deterred the expected surge in VC activity.

As Tusk put it, “I just don’t know many serious economists that think a trade war is a good idea for anyone’s economy,” highlighting the negative impact of such policies on the economy and, by extension, the venture capital industry.

In response to these challenges, Tusk has decided to shift his focus away from the traditional VC model and will not be raising a fourth fund. Instead, he is adopting an “equity-for-services” model, where he accepts equity in startups in exchange for providing guidance on regulatory environments, legislative communications, and government procurement.

This approach is not new to Tusk, as he has previously used it when he first started his political consulting firm, Tusk Strategies, in 2010. At that time, a then-small transportation technology company called Uber hired his services, offering him equity instead of cash, which led to him working on campaigns to legalize Uber and ride-sharing across the U.S.

Tusk’s expertise in creating regulatory frameworks for disruptive technologies stems from his background, which includes serving as campaign manager for Michael Bloomberg’s 2009 mayoral race and deputy governor of Illinois. This experience has equipped him with the skills to help startups navigate complex regulatory environments.

The traditional aspects of venture capital, such as fundraising from limited partners and managing compliance, board seats, and portfolio construction, began to feel like distractions from the work he truly enjoys.

By adopting the equity-for-services model, Tusk believes he can focus on the work he loves while potentially earning more than he would through traditional venture investing.

As Tusk explained, “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.”

He further highlighted the financial benefits of this approach, saying, “I actually made more money when I was in equity-for-services because even though there’s less leverage than there is on a venture check, you keep 100% of the proceeds. Whereas in traditional venture, I’ve got to return the investment capital to investors. I’ve got to repay the fees, then I’ve got to give them 80 cents on the dollar.”

Tusk Venture Partners will continue to support its existing portfolio companies until the fund’s life cycle concludes in 2031, ensuring a smooth transition as the firm shifts its focus to the new model.