An explosion in the number of unicorns has raised the bar for competing investors

For some employees, it’s make or break: unicorn status could attract a team. On the other hand, there are those who only want to be involved in the early stage.

According to Nabeel Hyatt of Spark Capital, the label doesn’t mean much to investors who will be judged by their exit anyway. However, “having the right partners along the way still matters,” Hyatt said at Fortune’s Brainstorm Tech conference on Wednesday. 

An uptick in unicorns has led Kara Nortman of Upfront Ventures to use the “barbell” investment strategy. “We only come in very early, and then we skip [series] A and B and then come in a bit later, with two separate funds structures,” she said. “I think the whole middle of the venture market is going to completely evaporate, just to be completely honest. I think there’s a whole bunch of old-school folks who have no idea how to operate in this environment and are going to go away.”

More unicorns are a signal to investors that founders are more easily able to find substantial capital. For Hans Tung of GGV Capital, this means one-third of his schedule is devoted to internal management and strategizing how to scale up. Looking ahead, “you will see some of these venture firms becoming a publicly traded company at some point,” he said.

Nortman said there’s been an industry shift as well. Investors are not only competing to prove their reliability, but they also need to assess whether a company could reach decacorn ($10 billion) or hectocorn ($100 billion) status. “Behind the scenes, we have to do the math to say, can it be that big? And what it’s done is, it’s taken lower-margin industries, and lower-growth industries, like direct-to-consumer commerce … and it’s firmly moved them outside of venture.”

“There are certain firms I don’t bring series As to anymore,” Nortman said, “because I don’t think they actually are doing diligence to really understand the business.”

Hyatt said that investors can choose either a shallow tactic or a deep tactic: raising $100 billion in capital, or building a tried and true relationship with the founder, no matter the risk. 

“When I talk to a founder after an exit, after they’ve gone through an IPO … they don’t talk about the board member and investor who was most valuable to them in terms like, ‘Oh, they wrote a slightly higher term sheet at some point in time,’” Hyatt said. “A conversation a founder has at that moment when the journey is over is, ‘This is the board member investor who was there when it really mattered.’”