I am a venture capitalist, which means I invest in companies that I think have promise. But my whole philosophy of investing changed when one of the entrepreneurs with whom I worked received an acquisition offer he hadn’t sought.

The founder was elated. I was dismissive. I remember saying that the amount wasn’t nearly big enough, that we could do better. Let’s grow faster, get bigger. Raise more capital! I started cheering, “Be aggressive! Be aggressive!”

He simply said, “Chris, my family is going to make $35 million on this transaction. That’s life-changing for us. You’re making more than four times your investment in a little more than four years. Can’t we all be happy?”

The honest question represented a turning point. My respect for the founder and what he had accomplished forced me to suspend judgment, review the data, and analyze the patterns to try to find a way to “be happy.” The first step was questioning my objectivity in this situation. Was my visceral reaction rooted in a bias for optimizing my personal track record and making my fund performance look amazing? Rather than an optimal outcome for the founder and the company?  Yes.

Assessing the specific situation more objectively, I gained a deeper appreciation of the fact that — thanks to the company’s careful use of capital and ability to materially increase its revenue — the risk of losing money was low at the outset and decreased with each quarter. I hadn’t factored that into my definition of investment outperformance. All investors obsess about a risk/reward equation. In high-risk scenarios, an investor must seek high reward (10X+) returns to counterbalance the risk. In a low-risk scenario, 2X is an attractive return, particularly in a four- to five-year period. Low downside risk and a quadrupling of my investment in four years? Yes, I should be very happy. I chose to support and celebrate the outcome with the founder.

This all occurred in the middle of a transition point in my career. After 20 years of investing, I’d chosen to go into semi-retirement mode in 2015. After a month of semi-retirement, there was an inflection point in my home. My wife said, “I love you honey, but you are now hanging around the house WAY too much. Can you please find something to do?”

Clearly, I needed to continue to invest to maintain the happy family, happy life equation. Parallel to the current circumstance in our country, we all must continue to learn and evolve to get better.  After 20 years of VC investing what had I learned? Entrepreneurial pragmatism and prudent capital deployment are not well respected by the vast majority of early stage venture capitalists.

All VCs appropriately have reverence for Silicon Valley and the amazing companies the region continues to create. Our initial investor instincts are, of course, to replicate the Bay Area approach in other regions. We consequently have largely adhered to the “alphabet soup VC growth model.” Raise a Series A, grow fast. Raise a Series B. Faster! Series C, D, E, F … X, Y, Z. This approach has undoubtedly catapulted many companies past major growth milestones, but it should not be universally applied to every emerging technology company, particularly in the current environment.

When VCs get a strong whiff of pragmatism from an entrepreneur, they usually respond with “No soup for you!” However, more balanced growth can greatly reduce risk even in early stage companies. Many companies outside the major VC hubs bootstrap for years prior to receiving a Series A. This creates a much lower risk investment profile and lowers the reward an investor must seek, allowing for a balanced growth strategy rather than growth “at all costs.”

VC investors not only need to rethink risk profile, they need to reevaluate the reward side of the equation. The private company exit environment has changed dramatically over the past decade. California represents about 50% of the US VC funding and has experienced more than 450% growth in funding over the past decade. However, California’s share of startup acquisitions has declined more than 35% over the past decade from 30% to 19%. This shift isn’t due to disproportionate gains in other large VC hubs like New York or Massachusetts; it’s due to a material increase in acquisition activity elsewhere. Why?

There is clearly a major, underappreciated shift in acquisitions triggered by the evolution of the private company’s financial sponsor ecosystem. Over the past decade, many private equity firms have evolved to target more growth-oriented companies and pay attractive exit multiples.  Nevertheless, these investors are much more financially minded. They value and appreciate capital-efficient growth. Hence the reduced acquisition activity in major venture capital hubs where the words “capital efficient” aren’t frequently used or well understood. Private equity and growth equity firms are very active and reliable sources of capital for companies with healthy, balanced growth. This category of more financially minded investment firms has experienced Silicon Valley-type growth over the past decade.

Growth at all costs can create major successes, but it can also screw up LOTS of companies that could have otherwise been healthy and successful with a more pragmatic approach. If growth materially slows in the grow-at-all-costs alphabet soup model, valuations plummet and access to more capital fades quickly. This can cause a massive compression of founder and employee equity value.

The main reason VCs criticize pragmatism is that they perceive it as a sign of a lack of ambition. That is often not the case. Most entrepreneurs have grand ambitions for their companies. But adding too much fuel prematurely can trigger the wrong kind of fire, turning those ambitions into ashes.

Partnering with pragmatic entrepreneurs that have created low-risk emerging technology companies can create strong investor and entrepreneurial alignment, a rarity in the early-stage VC world. Lower risk allows for a wide range of exit outcomes, where everyone can be happy.

Why now? Talent, capital, success, and liquidity are the four main components that accelerate a regional emerging tech ecosystem. The remote worker shift will become a major accelerant.  More tech talent will move elsewhere, creating a stronger foundation for local entrepreneurship.  And more tech talent can work from elsewhere, lowering the regional constraints of access to key resources. The amount of capital needed to achieve success has been greatly reduced.  Thanks to financial sponsors, the rate of success and liquidity has materially accelerated. A portion of that liquidity tends to get recycled into the local region via angel investing.  Success also creates more local scale-up expertise. The momentum builds.

Chris Pacitti is founder and partner at VC firm Elsewhere Partners.