Venture Capital Portfolio Construction: Diversify Then Concentrate

How many shots should a VC fund take? When should you double down? And how concentrated is too concentrated?

In this deep dive, I unpack practical portfolio construction lessons from Roger Ehrenberg (IA Ventures), Rory O’Driscoll (Scale Venture Partners), and others on diversification, reserves, follow-ons, and building multiple fund-returners in today’s venture environment.

Portfolio construction in venture capital has been an ongoing obsession of mine for the last few months. I have been devouring & recording any and all insights that various GPs have shared on podcasts, blogs, and social media posts.

In particular, I found this 20VC episode to be particularly helpful as Roger Ehrenberg (OG Founder of IA Ventures; now runs Game Changers Ventures) shared thoughts & anecdotes from his journey across multiple IA Ventures funds. The back-and-forth that he did with Jason Lemkin (SaaStr) and Rory O’Driscoll (GP – Scale Ventures) teased out aspects of venture portfolio construction that are rarely discussed in detail.

Here are the main insights I captured from this episode:

1/The extent of diversification should depend on how confident you are of the quality of shots

Rory mentions that “Diversification reduces your downside but also reduces your upside”. So, the number of shots on goal a manager should be taking should flow from how confident they are in the quality of their deal flow.

Btw, it was interesting to know that even the best managers start off with adequate diversification, even at later, less-risky stages of investing. As Rory shared, even a top-tier firm like Founders Fund had 31 shots in its Growth Fund 1. As it developed more confidence, Fund 2 had mid-high teens portfolio size, and Fund 3 is aiming to have 10.

My commentary: this also checks out with public market portfolio construction, wherein the managers with high confidence and established track records tend to opt for a 10×10 portfolio (10 stocks of 10% allocation each).

2/ IA’s classic seed portfolio construction: 20-25 constituents over a 3-4 year investment period

This lines up well with what has now become a market-standard seed portfolio construction.

My commentary: I would like to tie this back to the portfolio construction philosophy of Mike Maples, Managing Partner at Floodgate (Source: Venture Unlocked), wherein he believes “a seed portfolio becomes statistically diversified by 12, and beyond 25, you don’t add to diversification”.

3/ Roger goes hyper-concentrated on the 2nd and 3rd checks

He shares that IA wrote follow-on checks aggressively only in companies where they built high conviction on the team, and if assuming it continued to execute at this speed, that the market was large enough to support a big outcome.

So, they start with 1-2% of the fund at entry, then the 2nd check can be 5-7% of the fund.

The end outcome for IA is ~75% of deployable capital concentrating in the top 3-4 companies by the end of the fund.

4/ This portfolio construction depends on attractive entry valuations

Roger shares how the first check is relatively small (~$750K from a $100M fund) and, therefore, the only way to get decent ownership at entry is to invest at modest valuations.

My commentary: Not sure how this will hold up in the age of AI. And therefore, I am guessing that implied in this strategy is the fact that:

(a) You have to be fairly non-consensus; and/or

(b) Get discounted entry valuations due to your brand.

In Roger’s case, both of these appear to be true.

  • While everyone is doing AI, he has started a sports-tech focused fund, validating point (a).
  • He is also a top-tier brand of choice as a GP, validating point (b).

My commentary: the chosen portfolio construction has to be congruent with the GP’s track record and position in the ecosystem.

5/ “You need to start off with a significant element of diversification and then concentrate down.“

Rory summed up Roger’s thinking really nicely in this 1 sentence, and it has been stuck in my head since then.

My commentary: It almost reminds me of poker, wherein you are folding a lot and then, in a few hands, when you have high conviction that the odds are significantly in your favor, you go all-in.

6/ The current VC environment is pushing even the most concentrated VC firms to diversify a bit more

Rory shared how they shared with their LPs that the finish line for an exit has moved from $200M ARR to $400M ARR, and therefore, you have to hold these investments for longer, thus increasing risk and liquidity.

As a result, a Series B firm like Scale that typically has a concentrated sub-20 constituents portfolio is now thinking of pushing it up to 25.

7/ Portfolio construction should be based on a “temporal, many turns” game

It’s like how, as each card gets opened in a game, the probabilities of your hand keep increasing or decreasing. That’s why deploying reserves over multiple turns is a key part of any venture strategy.

Rory captured the mindset of approaching reserves really nicely as follows: “You don’t know everything and there is no 100% certainty, but at the margin, you know more than the incoming investor, so you can tilt things slightly in your favor”.

Rory also cited an analysis that Scale has done internally that says: “If you get the first 2 years of revenue that we underwrote, then the probability of getting a 5x goes up from 30% to 70%”. So once you have revenue and product-market fit, then you do have a lot of information to make an informed follow-on decision.

My commentary: This also checks out with something Anand Lunia of IndiaQuotient said a while back on a podcast (paraphrasing): “We note down what the founder said they will execute in this quarter, and then tally it with what they actually ended up achieving, in the next quarter’s update”.

Essentially, in a random, highly-risky game like early-stage venture, revenue expectations being consistently met over a few quarters counts as a major signal than what many would imagine.

8/ There are many paths to creating a multiple fund-returner

Roger mentions how there are many paths to getting to a multiple fund-returner outcome. He cites the following examples from the IA Ventures funds:

(a) The Trade Desk (TTD): didn’t have a product in market for 1.5 years, multiple bridges, multiple near-death experiences. But then once it hit, it just zoomed.

IA owned 17% of TTD at IPO, out of a little seed fund.

(b) Wise: kept chugging along right from Day 0. It was as close to an “up and to the right company from the beginning” as they have seen.

Btw, IA’s first check into Wise was $750K at a $5.5M post! Then Valar came in at $20M valuation, and IA doubled down. Then Valar came again at $160M valuation, and IA tripled down yet again.

IA had $9M over 4 checks in Wise, which is a 9% of the fund position.

IA owned 13% of Wise at IPO, out of a little seed fund.

(c) Datadog: compared to the previous two, IA owned only 2% at IPO. They did the seed, RTP led the A, and Index led the B. The valuation was really high compared to progress, so they didn’t back up the truck on follow-ons in seed and A. But it was still a multiple fund returner because the size of the outcome was so large.

(d) Digital Ocean: 1st check was $3M (3% of the fund). When a16z led a $37M Series A, IA wrote a $7M check (7% of the fund).

9/ What if the follow-on check is at a really high valuation? Do you still do it due to high conviction but perhaps lower expected returns?

This is where the insights get really interesting, as this scenario fits very well with what’s going on in AI right now.

Roger recommends that each follow-on check be evaluated independently from the previous check. So, it’s about the risk-adjusted MOIC that’s possible on that check.

So, if say the follow-on is at a $300M valuation, and you believe that it can be a $100B company at exit, he recommends still writing a meaningfully large check up to say a risk-limit % of the fund (say 10% of the fund).

He illustrates this with a real example. In the case of Trade Desk, IA invested in the pre-seed, bridge 1, bridge 2, and a small Series A at $16M post-money. Then, after a few years, the company’s next round was a $20M primary + secondary at a $280M post. Even in that round, IA invested a $3M check out of a $50M seed fund. That $3M returned $40M on exit (13x MOIC).

Essentially, Roger looks at venture as a risk-adjusted, cash-on-cash business.

10/ The Peter Thiel philosophy on follow-on rounds

Rory cited Peter Thiel’s philosophy on follow-on rounds that I, too, listened to many years back and have also executed on in my own doubling-down decisions:

“Whenever a reputed new investor is doubling down on a company, it’s almost always a good idea to invest”.

11/ The value of cross-funding investing

Jason mentioned that when you are trying to concentrate 10% of your fund into the winners, you run the risk of running out of capital fairly quickly and losing out on new opportunities that might come your way.

Roger cited cross-fund investing as a solution to this problem. So if the LP base is fairly consistent across funds, you can keep doubling down on the winners in Fund 1 from Fund 2. So, instead of investing out of say a $100M fund, you are investing out of a $100M Fund 1 +$160M Fund 2 = $260M fund corpus.

How the EU–India Deal Raises the Ceiling for Indian Startups

The EU-India trade deal marks a meaningful inflection point for Indian startups: expanding export markets, diversifying sources of capital, and raising the long-term ceiling for India-to-the-world technology companies.

As a cross-border investor, here’s why the EU-India trade deal is making me even more excited about the India-to-the-world tech story:

1/ Should provide a fresh set of tailwinds to the India export story. This was much needed after the lacklustre results of the “Make in India” initiative over the last decade.

2/ In the past decades, the Indian offshore services story, the software exports story, and the cross-border SaaS story have been heavily reliant on the US. While the EU is nowhere close in terms of depth of market & innovation-buying behavior, its addition as a viable market derisks the Indian tech story to some extent.

3/ Given EU countries are leaders in critical technologies, in addition to being potential customers for the next-gen of Indian deeptech companies, I also expect them to engage as valuable “partners” across the board including in aspects like technology transfers that enable indigenous manufacturing, joint ventures in areas of mutual interest, and perhaps, increased collaboration between research institutions and organizations too.

4/ India still needs enormous foreign capital to get to the $10,000 per capita GDP mark. In addition to long-term US capital, which I expect to remain committed to India both on the private and public side (despite recent FII selloffs), deep sources of patient capital that reside in EU universities, endowments, insurance companies, century-old corporates, and multi-generational family offices should also step in and provide much-needed FDI for India.

5/ On enterprise software and deeptech, I have been underwriting the ability of Indian startups to serve the “Global South”, which largely remains under-covered by US companies. Now, with the EU being added as an open market for Indian exports, the TAM for Indian startups just goes to another level, which should ultimately translate into larger exit outcomes.

Of course, dealing with EU customers will have its own set of challenges compared to the US:

– Large and/or fast-growing markets like Germany, France & Italy aren’t native English speakers. Adapting to each language and culture is challenging.

– Constituent markets are quite fragmented, have really different cultures that have been at loggerheads in the past, and therefore, while it’s called a Union, serving it as a homogenous bloc might not be easy.

– EU customers aren’t classical early adopters and move really slowly in buying cycles.

– Many constituent markets have stifling regulations around things like data privacy, security, environment & labor, increasing inertia to innovate.

– EU operates on different labor norms, stronger worker protections, and stricter work-hour expectations that can slow execution compared to vibrant markets like the US, India, and China. Overseas companies, especially younger ones, might struggle to adapt & serve the expectations shaped by strong labor protections.

– Overall, I have observed over the years that EU customers are more skeptical of dealing with Indian companies and talent compared to, say, the US.

Nevertheless, this is a great development, and kudos to the Indian government and negotiating teams for pulling off a masterstroke. Now comes the hard work of turning legal clauses into tangible business outcomes for both sides.

The real test will be whether founders, investors, and operators can move fast enough to capitalize on this opening.

My Blindspots As A VC

On misreading founders, moving too fast, and why portfolio construction is my safety net.

Over the past few weeks, I have been doing a retrospective analysis of the Operators Studio portfolio. Given that I have adopted a “founder-first” investing style, I have been specifically trying to analyze cases where I got a wrong read on the founder.

Startups can struggle/ fail for N number of reasons. Especially as a seed investor, most of these externalities are out of your hands. Therefore, while doing such analysis, I like to keep reminding myself not to fall into the “Resulting” trap.

Annie Duke defines Resulting as “the cognitive bias of judging a decision’s quality solely by its outcome, rather than the decision-making process itself”. Top poker players are really good at avoiding Resulting while studying their plays post-facto.

So when outcomes turn out to be negative in a seed investment, rather than fixating on “why the company failed?”, it’s more useful to ask “how should the investing process be improved for future deals?”. And in my context, it’s typically the process of evaluating the founder.

Coming back to the retro analysis I have been doing on my deals, I have been able to identify a couple of blind spots that seem to be showing up repeatedly. Here’s a deep-dive on each of them:

1/ Getting blindsided by the founders’ pedigree

Sometimes, founders show up with just a jaw-dropping pedigree – IIT Bombay Computer Science, Stanford PhD, top leader at Big Tech etc. This pedigree is typically also accompanied by a strong show during the pitch meeting, demonstrating differentiated access & networks, and just overall self-belief that screams “I am awesome!”.

Looking back on such pitch meetings, it’s very easy as an investor to get carried away by this pedigree & show. However, as I am learning with some pain, pedigree doesn’t automatically translate to the many enablers of eventual success in a founder – grit, the ability to pound pavements selling stuff, controlling your ego, resolving conflicts, and frankly, eating glass during tough times.

One of my key maxims learned over a long venture career is to always distinguish whether the person is a strong professional or a (potentially) strong founder. Both are very different things.

Even with this hard-earned insight, it turns out that executing this day in and day out is extremely hard. Even the best of us get swayed by past track records.

This retrospective is a self-reminder to bring back this maxim as part of the core of my investing process.

2/ Pulling the trigger without spending enough 1:1 time with the founder

My natural style as an investor is highly instinctive. This often manifests in quick Yes’s during the first pitch meeting itself.

Over a long career, this has mostly benefited me. Almost all my major wins were quick Yes’s. But there is a difference between “moving with a pure initial instinct” and “being trigger-happy”.

In a few cases, I have pulled the trigger without spending enough 1:1 time to peel the layers on a founder. If I go one level deeper, in most cases, this was due to some fear – fear of being on the wrong side of deal heat & not getting allocation, fear of feeling disadvantaged as a relatively small check writer, fear of deployment pressure (“I need to do a deal this month”).

These fears are particularly amplified by the current investing environment, where seed deals move in days, where lead VCs have particularly sharp elbows, and where many founders fall prey to becoming over-transactional during the fundraising process.

I have come to realize that these fears are incredibly counterproductive to a long & sustainable venture career. Seed investing is at least a decade-long journey that is full of ups and downs. An important way to create a strong initial foundation that then delivers a consistently good experience to both the founder and the investor over multiple years is to dedicate enough effort upfront to build trust & a mutual connection.

When this trust & connection exists, the wins taste exponentially sweeter, and the pain of losses gets blunted.

Any diversified enough venture portfolio of decent quality is highly likely to catch at least a couple of winners. But the key to amplifying success over decades, both as a founder and as an investor, is to play repeated games with a set of highly trusted people. The starting point of these relationships is almost always the foundation of trust built during the first-ever transaction between two people.

Even empirically, if I study all my deals since 2011, whenever I have built a strong mutual connection with a founder upfront, the eventual outcomes have almost always been positive economically and/or experientially (the randomness has only been in “how positive?”).

Therefore, this is again a self-reminder that I should ensure I am devoting enough upfront time to build trust & a mutual connection with new founders I meet. And once I have built an informed instinct around a new person, given I now have 15 years of on-ground data on how it usually pans out, I should default to trusting & following my judgment without any fear.

The final line of defense against these blind spots…

Even at our most introspective and self-aware selves, we still have the same monkey brain that has been wired by hundreds of thousands of years of evolution. Even the best of us should expect to keep falling prey to various kinds of cognitive biases and blind spots across multiple deals.

The mark of growing up as a venture investor is accepting this truth and then acknowledging at a deep, internal level that the only line of defense against our own foolishness is portfolio construction.

As a young VC Associate way back in 2011, I used to always wonder why OG VC GPs kept harping on portfolio construction, spending hours poring over Excel sheets that frankly, had most of the numbers pulled out of thin air (an undeniable fact of any financial modeling efforts in early-stage venture).

Similarly, when I decided to come back into venture in 2023, I kept hearing how LPs care a lot about portfolio construction. And that it is the difference between someone being just an investor vs being a professional fund manager.

Studying my still fledgling portfolio today, I can already see how following even a rudimentary portfolio construction strategy has saved my a** several times already, and its impact will manifest in major ways over the remaining Fund life.

When you experience something working in real life, your buy-in starts growing organically, giving it higher chances of eventually becoming a sustainable habit. I can see this playing out with my rapidly growing appreciation of all the beauty and nuances of portfolio construction.

In fact, I can guarantee that 2026 will see my study and obsession with VC portfolio construction go many levels higher, and thankfully, I don’t need a New Year’s resolution to make it happen.

Note: My next post will be on some portfolio construction insights I have gleaned from listening to Roger Ehrenberg, Founder of IA Ventures. Stay tuned for that!

The “Mission-Pitch”

To break through AI noise in the Bay Area right now, figure out your “why should anyone care?” pitch.

Important tip for international founders who have recently relocated to SF and are looking to build their networks here for customers & fundraising:

As you meet new people, it’s important to have an abstracted-out, 10-20 second mission pitch that clearly outlines “why should anyone care?”.

More than market analysis, facts & data, this pitch should have a strong underlying emotion that can immediately connect with someone who might have an overlapping world view.

There is immense noise in the Valley right now, and every space/ vertical has tens of startups going after it. All pitches sound similar, most founders have similar backgrounds, and all content looks the same.

Breaking through this clutter is hard, especially for folks who don’t have a high-signal, prior track record in the Bay Area.

In these cases, dialing up the personal authenticity quotient big time, and having a clear “Mission-Pitch” with a strong emotional pull can be extremely helpful in winning over new relationships.

In an ecosystem where every decent startup is flush with capital and early traction, founders need to 1) go deep, 2) go sharp, and 3) manage the psychology of market participants in order to stand out.

Default-Alive

Default-alive vs growth-at-all-costs: how founders can balance survival, PMF, and fundraising windows to play the long game.

As a founder, if you are *truly* in it for the long haul, it’s in your absolute best interest to get to “default-alive” as soon as possible.

Default-alive ensures you can play the right long-term game, adopt an operating strategy that doesn’t over-optimize for the short term, and execute in partnership with stakeholders (employees, customers, partners, investors) that are deeply aligned with you.

And then, when all the pieces of the orchestra are starting to come together in the beginning notes of a beautiful symphony, that’s when you raise maximum capital and step on the gas.

You know what the best part is? In this case, you continue to be the orchestra’s conductor for a long time, with maximum ownership & ultimate value capture.

Now, there is a Catch-22 here. Getting to default-alive usually comes at the cost of rapid growth. And as we all know, VCs index on growth while evaluating startups. So does the company become unfundable while on the default-alive path?

My response is, it depends on the market dynamics, competitive intensity, and progress towards PMF/ how much time & effort will it take to get PMF (eg. h/w vs s/w, large enterprise contracts vs PLG/prosumer etc.).

That’s why it’s a very nuanced and contextual decision that founders need to think through, ideally jointly with seed investors.

Private market windows are fickle and keep opening & shutting down based on sentiment around the domain, progress in the business, the founder’s storytelling etc. As a founder, one has to be able to survive (often at the cost of growth) when the window is shut. And then create momentum & raise again when the window re-opens and/or an inflection point gets reached in the business.

In the majority of cases I have seen, it plays out like this:

Company raises a round -> burns towards finding PMF -> is unable to raise the next round, either due to not hitting adequate milestones and/or market conditions -> founders raise a bridge and continue with less resources.

It can play out in 2 ways from here:

(1) No PMF possible, founder loses conviction, shut down, or

(2) Grind towards early PMF, still have conviction, try to raise again.

In (2), if you can raise, then it’s great. You have a PMF’d business + capital to deploy and accelerate growth.

However, if you aren’t able to raise and you aren’t default-alive, then even after finding that elusive PMF (which 9 out of 10 startups are unable to find ever), you can’t do anything with it and have to shut down.

But, if you have PMF and are default-alive, then you can still continue the journey (perhaps with lower growth) until you either hit another inflection point in the business and/or the private market window opens up for you. In which case, you then raise, accelerate growth, and continue building.

TLDR: If you can be patient and be willing to grind hard upfront without seeking external validation, being default-alive is one of the best ways to live & build!

How to Get Warm Intros Right: My Ground Rules as a VC

Learn the ground rules for warm intros—double opt-in, reputation, skin in the game, and more. Avoid common mistakes & get intros right.

As a venture investor, warm intros are my lifeline, both as a receiver (new deals) and a giver (for portfolio founders & co-investors).

Given the sheer volume of the intro pipe I deal with, I also see the goods and the bads of it all. In particular, I see folks making 101 mistakes and breaking what have become fundamental rules of intros that the Valley plays by. Break them, and it screams, “I am not ready to play in the major leagues yet!” to the ecosystem.

For the benefit of everyone out there, sharing some of my ground rules for warm intros:

1/ Double opt-in

Internalize this deeply – double opt-in is the only right way to do intros. Violating this cardinal rule significantly reduces your credibility.

2/ Reputation

Implicitly underlying every warm intro is your personal reputation. In the venture ecosystem, judgment is everything, and who you are vouching for is a major signal for it. Think about that the next time you agree to introduce someone.

3/ Skin-in-the-game

I treat intros without skin in the game or demonstrated conviction as low-signal “favors”. Personally, I don’t do this type of intros at all. But definitely receive a ton of them.

As they say, talk is cheap. Or in the context of this post, “sending an email is cheap”. The signals underlying the email are what matter.

4/ Limited bullets

When I started my career in venture, one of the Partners taught me a valuable lesson that I follow to this day – “you only get 3 bullets with each relationship in a lifetime. So fire each bullet carefully”.

Being indiscriminate with warm intros is the worst thing you can do as a professional. It’s like spamming – your credibility goes down exponentially with each ask that hasn’t been thought through properly.

5/ Acceptance rate

Controlling the acceptance rate is as important as the send rate. As a constructive participant in the flow, you are individually responsible for ensuring no time gets wasted on either side.

So it’s important to control that carnal urge to “network” and vet each inbound request properly to ensure there is a high likelihood of mutual fit before the actual meeting.

It’s exactly like qualifying sales leads. Just because someone is doing a warm intro doesn’t mean it’s a good fit at this point in time.

Hope these rules are helpful. Wishing you a long track record of fostering interesting & useful connections.

On Who Really Shows Up When It Matters

Support at critical moments rarely comes from where we expect. Familiarity, expectations, and timing often shape who really shows up.

I have observed this weird phenomenon across both my professional and personal lives. In fact, it keeps surfacing every year or so, and therefore, I am compelled to blog about it today. Here’s how I would describe it:

At every important turning point in my life, where I desperately need a few (what I would consider) extremely close relationships to step up for me, almost all of them have failed to show up.

But at the same time, a few connections, whom I don’t have any significant shared history with and wouldn’t consider “close” by any stretch, end up stepping in and backing me at these key moments.

It has happened so many times now that I feel this is some random rule of nature that should have a name. Here are some personal examples:

  • When I moved to the Bay Area in 2014, having never studied in the US, with no job in hand, and with literally 2 bags, the person who gave me what turned out to be one of the most significant breaks in my career was…the then-husband of my wife’s ex-colleague.
  • One of my most important backers, who was an extremely small angel in my startup but ended up becoming a key influencer in both my decision to come back into venture as well as a major tangible supporter in many ways since then, is the husband of the 1st cousin of one of my past venture collaborators (interestingly, I lost touch with the original person who connected us many years back).
  • While we as a family were going through challenges on multiple fronts during the pandemic years and hit several low points, the people who saved us were not our oldest friends but a family we met through our older son’s first daycare.
  • The person who ended up giving what turned out to be an incredibly strong referral to my wife at Google more than 8 years back was someone I had overlapped with at a startup for barely 3 months and had no direct work history with.

I have many other examples that are unfolding as we speak, and which I hope to add to this list after a few years.

I don’t know if you have experienced something similar in your lives, but I have been thinking hard for at least a year now about why this happens repeatedly. Here are a few underlying things that I have noticed:

1/ Familiarity bias – when people have been too close to you over an extended period, they see all sides, moods, emotions, and fallacies in your personality. Because of this, I feel they end up subconsciously discounting your skills on many occasions.

I see this play out in venture all the time. Existing investors usually see the sausage being made, and therefore, are often more pessimistic on a portfolio company’s prospects compared to new investors evaluating the same opportunity.

For those who understand Hindi, there is a grandma’s saying on this phenomenon – “घर की मुर्गी दाल बराबर”.

2/ Expectations bias – humans have a tendency to keep very high expectations of people they consider close, especially if they are family or have been known for a long time. So whatever these relationships do at the crunch moments, it’s perhaps impossible for them to live up to the high bar they are being held to.

3/ Timing – the quality & extent of human collaboration depends a lot on timing. Where are each of the subjects in their own life arcs? What is their mind space looking like then? What is the macro environment in which the collaboration is playing out?

In almost all situations, humans are essentially acting in their own self-interest first. So, while to the “receiver” (me in the initial examples), it ends up being a game-changing intervention, the act is also delivering a major utility for the “giver”.

A parallel idea is seen in a key principle of marketing strategy – the job is not to convince uninterested prospects, but to be in the consideration set of leads when they are actively looking to buy a product. Sounds like a simple idea from a b-school course or Kotler’s book, but I have only learned its power at this stage of my career.

Translating this to the core idea of this post, best collaborations happen when both givers and receivers are in the market, and are a great fit for each other’s needs at that specific point in time. This has nothing to do with how close the people have been previously.

Given that I have now observed this core phenomenon, I am trying to do a few small things differently so that I can be on the right side of this rule of nature more often and with a much lower emotional toll. These include:

  • Instead of meeting the same set of people all the time, strive to continuously meet new folks and add them to an ever-growing funnel of relationships.
  • Be present and show up strongly even in first meetings with new people.
  • Following my guru Charlie Munger’s age-old advice, have lower expectations of close relationships and replace that emotion with gratitude that they choose to include me in their lives.
  • For major turning points every couple of years, instead of just repeatedly putting “asks” in front of the same set of people, cast a wider net out into the universe using a combination of cold outreach and warm intros.

Anyway, I know this post is a bit all over the place. In fact, I was struggling to even think of a title for it. But these ideas are from my lived experience, and are important enough to be put in front of you.

Team vs. Market at Seed Stage

The best seed VCs bet on the team everytime.

While doing some random browsing, I came across Linear’s $4.2M seed fundraising coverage on TechCrunch in Nov’19. This paragraph from the post stood out to me:

“Linear is a late entrant in a world filled with collaboration apps, and specifically workflow and collaboration apps targeting the developer community. These include not just Slack and GitHub, but Atlassian’s Trello and Jira, as well as Asana, Basecamp, and many more.”

Imagine looking at the dev collaboration space as a seed VC in 2019. It would be a tremendous leap of faith to believe that there could be space for a new entrant in a market with multiple scaled incumbents and indie products.

How were Sequoia and Index able to pull the trigger then on the Linear deal? My guess is because they followed the core philosophy of top-tier seed investing, which I have myself seen play out multiple times in my career – “that seed bets are all about the team, and that overthinking the market & competition at this stage adds fatal blurriness to what should be a sharp team-centric seed lens.”

I have studied the anti-portfolios of many legendary VC firms spanning decades, as well as connected the dots with key misses of VC firms I have personally worked with or closely observed in my career. A dominant theme across the anti-portfolio set is getting distracted by overstudy­ing the ‘market’ and as a result, overlooking what was a star founding team.

A nuance to this “team vs market” point that I have tried to incorporate is that as long as the market is directionally correct and, more importantly, the team has a strong fit with it, I pretty much give it a checkmark at my end and quickly move on to spending most time evaluating the founders.

PS: btw, I have a similar observation on seed entry valuations as well. Will cover it in another post!

The Applications layer in AI is getting brutal

This story can play out in many ways.

Each use case has tens of funded companies. Each is churning out features rapidly, getting to parity faster than customers can imagine. Each has early traction and a worthy claim to win.

What will it take to eventually win the game?

1) Will it be about surviving the multiple shakeouts that each vertical/ use case will eventually see? Letting capital-bloated companies implode and letting the “tourists” give up…

2) Will continued product obsession be the key? Essentially refining the product beyond where others give up…

3) Will choosing non-obvious wedges/ ICPs be the way to differentiate & survive? Serve markets that others are choosing to ignore/ finding unviable to serve…

The technology is still so early, and we clearly have a few decades of upside left. Yet, there is a gold rush going on right now, which I am sure will push people to optimize for the short term.

In that case, will founders who are truly playing the long game ultimately win? Or is it more important to “surf the wave” in the present?

The former will look unattractive in current times and hence, will be undervalued and “contrarian”. The latter will appear to be imminent winners, yet could flame out.

Just some thoughts running through my head!

Investing in Gameramp

The backstory behind the Operators Studio investment in Gameramp.

Stoked to share that Operators Studio has participated in the $5.4Mn pre-seed round of Gameramp, alongside BITKRAFT Ventures, South Park Commons, DeVC, and MIXI Global Investments.

Gameramp is building adaptive software for interactive apps, starting with gaming as a vertical. Its suite of APIs and AI Agents empowers gaming companies to deploy their monetization strategy with super-human speed and scale. End outcome – games scale faster and more capital efficiently.

I have known Vivek Ramachandran since his gaming VC days at Z47. He is one of the sharpest minds in the space, combining his venture chops with operating expertise built at EA and Big Viking Games.

While I knew Vivek well, meeting Sashank Vandrangi convinced me that this is one of the strongest founding teams in the space. Sashank’s mind moves at lightning speed and gives wings to his sharp product chops built at the likes of King and MPL.

Btw, this relationship started with a cold DM from Vivek a couple of years back, so yes, quality cold outreach continues to deliver value in this noisy world!

Gameramp fits the ‘India Supply to Global Demand’ theme at Operators Studio. India has an incredible pool of gaming developers & operating talent, and I believe this is the right time to build global gaming-tech companies that leverage this base.

This is also the 2nd gaming-tech portfolio for Operators Studio, after Terra (Gaming platform for global Gen Z).

Cheering for more gaming-tech companies being built from 🇮🇳 for the 🌎!

PS: Gameramp is hiring engineers, researchers, and builders who want to push the edge of what’s possible. If this excites you, reach out to Vivek or Sashank.