Always Run an Auction
magid.substack.comAs an auction theorist who's biased towards putting things in auctions and as an operator who's been through the venture investment process several times, I'm biased in wanting a more efficient capital formation process with less adverse selection (better outcomes) for both sides. So, I'm doubly biased, but I appreciate why this hasn't been done and that it could be done.
Classical auctions aren't a good fit because they can't handle non-price factors. However, a combinatorial clock auction could handle non-price factors while also improving price discovery. But as Milgrom says (paraphrased), the best auction is the one people use, so the more realistic outcome is what OP describes: running your own (implicit) auction.
Well I do have you to thank for teaching me about combinatorial auctions :).
That said, you can think of the auction in two parts - the first gets the relevant people from the starting line to the actual bidding. The second part is where you actually make decisions. The latter part in this dynamic usually has few enough participants that a founder can run the variables in his/her head.
What would be interesting to see is whether or not more funds would get to the bidding stage with a robust combinatorial auction at the beginning of the whole thing.