Top 10 Lessons Learned from Successful VCs
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Top 10 Lessons Learned from Successful VCs
What makes a great venture capitalist?
Navigating Web3 tides with focused insightsWritten by: Mario Gabriele
Translated by: TechFlow intern
What makes a great venture capitalist? Over the past year, I’ve studied some of the most successful venture firms in history—including USV, Y Combinator, Multicoin, and others—and distilled ten key lessons. Let’s dive in.
1. Be Prepared (Coatue)
As the philosopher Seneca said, "Luck is what happens when opportunity meets preparation." The crossover fund Coatue Management exemplifies this principle. As outsiders to Silicon Valley in the early 2010s, the Laffont brothers had to find alternative ways to demonstrate their sincerity.
One of their most effective tools was conducting outside-in due diligence—deeply researching companies before meeting founders. This approach helped Coatue gain access to Snap, Lyft, and countless other companies. While a “reverse pitch” isn’t always appropriate—especially in early funding rounds—gathering as much context as possible demonstrates genuine interest in a startup and helps steer early conversations toward more meaningful discussions.
2. Think from First Principles (Multicoin)
Venture capital is often criticized for fueling FOMO (fear of missing out). Skeptics argue that investors don’t think independently but instead follow social cues. For some managers, the fact that Sequoia or Benchmark leads a deal is justification enough—no further thinking required.
Borrowing another firm’s convictions prevents you from developing your own—and may even blind you to true opportunities. Multicoin Capital stands out as a fund that thinks from first principles. Throughout its history, Multicoin has developed unique theses, many of which contradict conventional wisdom. While the crypto ecosystem focused on Ethereum, Multicoin began believing in the need for a high-speed Layer 1—a conviction that ultimately led to its investment in Solana.
The best investments often appear crazy to the rest of the market. The only way to find them is to do your own analysis and think from first principles.
3. Value Extraordinary Ideas (USV)
VCs often say they invest in people, not ideas. According to this view, the inherent uncertainty of startups means it’s foolish to become too attached to any specific concept. Instead, back an exceptional builder who can experiment and iterate their way to strong product-market fit.
For example, if Stewart Butterfield told you he was building a new video game, questioning its exact mechanics might be irrelevant—you simply trust someone like him will build something valuable.
Union Square Ventures doesn’t fully subscribe to this approach. While the New York-based firm also values founders, it’s willing to back ordinary entrepreneurs with extraordinary ideas. Companies like Twitter, Etsy, and Tumblr were rejected by other VCs due to their founders, but USV looked beyond that and recognized the uniqueness of what they were building. The idea, above all else, mattered.
4. Treat Investing as a Product (Y Combinator)
Venture capital is a service business—but it can be more than that. Y Combinator is perhaps the best example of a firm treating investing as a product challenge. Beyond its famous accelerator program, YC has built a suite of additional products, including an internal social network, co-founder matching service, and hiring platform. These tools help founders solve their most pressing problems, enabling them to grow their networks and recruit talent.
While the best VCs excel at building genuine relationships, productizing support benefits both the portfolio and the firm itself.
5. Genuine Empathy (Solocapitalists)
In some ways, the rise of "solocapitalists" is surprising. How can solo investors compete with better-resourced funds?
Speed is undoubtedly part of the solocapitalist appeal. In recent years, competition in venture capital has intensified, and being able to make decisions without a multi-partner investment committee is a clear advantage.
Yet a more tangible and enduring edge appears to be empathy. Many of the most prominent solo investors have substantial operating experience—and may still be running their own companies. Elad Gil, Lachy Groom, and Josh Buckley all fit this mold. In an industry often devoid of humanity, empathy holds real value.
6. Size Positions According to Conviction (Multicoin)
You should size your positions based on your conviction. Often, this is nearly impossible—the companies you’re most excited about are usually the most competitive, leaving you with limited allocation. But when you believe you’ve found a future leader, you should do everything possible to maximize your stake. Assuming you trust your judgment, this approach delivers the highest returns.
Multicoin embodies this principle. The crypto fund deployed significant capital into projects it believed in: Helium, Arweave, Solana, Serum, and Algorand were all major bets for Multicoin—and generated substantial returns.
Whenever possible, align your investment size with your level of conviction.
7. Adapt to Opportunity (Tiger Global)
Tiger Global has demonstrated remarkable flexibility throughout its history. Since its debut in 2001, Chase Coleman’s fund has undergone multiple transformations. It started as a hedge fund focused on U.S. telecom stocks, shifted to emerging markets (particularly China and India), and eventually moved into venture capital. Like few others, Tiger Global has proven the value of adaptability, refining its strategy to match shifting opportunities.
This approach worked well for nearly two decades, but this year, Tiger Global has taken a hit. Its venture funds reportedly lost $5 billion in Q1, and a June announcement revealed its hedge fund had shed $25 billion.
While Tiger misjudged market conditions in 2021, that doesn’t erase its strong track record prior to that. In the firm’s darkest moments, we can look back at its success history and extract a useful lesson.
8. Cultivate a Sense of Timing (USV)
Timing is often associated with public market investors—those who know when to enter or exit are hailed as exceptional managers.
But timing matters in private markets too. Despite lower liquidity, venture investors must develop a solid sense of timing. Union Square Ventures excels here, combining instinct, discipline, and structure.
First, the firm shows uncanny skill in identifying entry points. USV backed Twitter before social media became a mature industry and supported Coinbase when most dismissed Bitcoin as trivial.
Equally important, USV knows when to exit. It locked in gains on Tumblr, Zynga, and Coinbase before their values declined significantly. This seems to stem from intuition, experience, and a structured approach. Partner Fred Wilson wrote: "In these pre-IPO liquidity transactions, we typically aim to liquidate 10% to 30% of our position."
Investors must study market history, develop strong convictions about trends, and establish structured exit frameworks to cultivate a sense of timing.
9. Go Global (DST Global)
In 2009, Yuri Milner invested $200 million in Facebook at a $10 billion valuation—while other investors valued the social network between $1 billion and $4 billion.
DST was willing to make this bet because its team had unusual insight into the monetization potential of social media. Milner had been closely involved in launching and growing several Russian social platforms, observing how they converted user attention into advertising revenue.
This is a classic case of DST leveraging insights from one region to invest in another. In fact, Milner’s fund grew by first identifying high-potential new business models, then seeking winners across global markets.
An increasing number of great companies are now built outside the U.S., and funds like DST are positioned to find them.
10. Be Honest (Sequoia)
One firm I haven’t mentioned yet is Sequoia, but based on conversations with founders and studying their work, they appear exceptionally skilled at telling the truth.
The “R.I.P. Good Times” memo shared during the 2008 downturn is a prime example. In that presentation, Sequoia frankly addressed economic turmoil and its potentially devastating impact on venture capital and portfolio companies. Earlier this year, Sequoia shared a similar series titled “Adapting to Endure” with its portfolio. Once again, it emphasized the severity of current conditions and urged decisive action.
Honesty isn’t always welcome in the moment. But over a long enough time horizon, it’s essential for earning builders’ trust and respect.
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