Is venture investing best organized as a team sport with specialized complementary roles, or practiced as an individual pursuit?

Nigel Morris · May 24, 2021

You need a partner to build real value — individuals are far less effective apart than in the right pairing

The Officer Buckle and Gloria lesson mirrored his own experience: Richard Fairbank at Capital One and Frank and Bill at QED

38:11 20VC: Why Bundling Does Not Work, How The Best Founders Analyse Unit Economics, Why The Way We Approach Mental Health in Venture and Startups is Wrong with Nigel Morris, Co-Founder & Managing Partner @ QED Investors

Auren Hoffman · Nov 3, 2023

Venture has wrongly been treated as an individual sport rather than a team sport

even the industry's awards are given to individual investors rather than to firms, which is crazy, and genuinely full-stack investors like Mike Moritz are rare — most people are only good at one part of the stack

Scope: a few true full-stack investors exist

15:41 20VC Roundtable: Why Early Stage Founders Should Not be Investing, Why Great Founders Have Low EQ, How the Structure of VC Firms Will Change, Will Founder-Led Funds Compete with Sequoia & Is Investing a Team Sport?

Auren Hoffman · Nov 3, 2023

A solo GP fund cannot scale indefinitely — venture is a team sport and you eventually have to build a team to grow the firm

Enduring companies are rarely one-person companies, and venture is more competitive than any SaaS business because you are selling a commodity, money

Scope: applies whether or not the solo GP is a founder

36:51 20VC Roundtable: Why Early Stage Founders Should Not be Investing, Why Great Founders Have Low EQ, How the Structure of VC Firms Will Change, Will Founder-Led Funds Compete with Sequoia & Is Investing a Team Sport?

Auren Hoffman · Nov 3, 2023

Venture firms will increasingly split the investing stack into specialized roles and play to individual strengths, rather than being five individuals sharing a pool of capital

companies don't ask one person to do both engineering and sales because specialists are better at each; he himself isn't the best at deep diligence and churn analysis

Scope: requires having the right team

16:18 20VC Roundtable: Why Early Stage Founders Should Not be Investing, Why Great Founders Have Low EQ, How the Structure of VC Firms Will Change, Will Founder-Led Funds Compete with Sequoia & Is Investing a Team Sport?

Jason Lemkin · Nov 3, 2023

Being a full-stack solo investor is not optimal; investors should only do what they're good at

after ten years doing everything alone he can point to deals he missed; full stack is like doing sales, engineering and marketing yourself — only viable in the early days

Scope: full stack works in the early days of a firm

17:49 20VC Roundtable: Why Early Stage Founders Should Not be Investing, Why Great Founders Have Low EQ, How the Structure of VC Firms Will Change, Will Founder-Led Funds Compete with Sequoia & Is Investing a Team Sport?

Sarah Guo · Apr 28, 2023 · hedged

A very small partnership can make better decisions and win better access by playing as a team, but this is very hard to actually achieve

Easy to state as an ambition, hard to execute; she wants a partnership rather than a firm with her name on the door

40:07 Small partnerships playing as a team improve decisions and access though hard to achieve

Auren Hoffman · Nov 3, 2023

The split should pair professional investors, who are skeptical and strong on financials and diligence, with dual-threat operator-CEOs, who are optimistic and see opportunities but miss threats

the two mindsets are complementary, so a team covers both the upside and the risks

17:15 Pair skeptical professional investors with optimistic operator investors for complementary coverage

Harry Stebbings · Nov 3, 2023

You can get the benefits of team-sport investing without hiring the complementary skills — co-lead rounds with great professional investors who complement you but sit outside your firm

his firm already co-leads with professional investors who supplement their skills exactly as an in-house partner would, so structuring rounds that way removes the need to build the team internally

18:11 Co leading with external complementary investors substitutes for in house team building

Jack Altman · Nov 3, 2023

The full-stack lone-wolf model still works — many of the greatest investors build their own brand and taste, make their own investments and work with companies through the life cycle

for every highly specialized firm there are good counterexamples that look like a loose coupling of lone wolves, so there is real value in that format too

18:37 Full stack lone wolf model still works for many great investors

Harry Stebbings · Nov 3, 2023 · hedged

A solo investor could plausibly raise and deploy a billion-dollar fund by going later stage and writing very large Series D checks

Large late-stage checks require fewer decisions, so deployment does not require a big team

37:32 Solo investors can scale via late stage fewer larger checks

Auren Hoffman · Nov 3, 2023

Deploying $100M checks is the easy part; generating consistent returns at that size requires large diligence teams, which is why a solo investor cannot do it well

Insight, one of the more successful late-stage firms, puts roughly a 20-person team on evaluating a single deal

37:42 Large check sizes still require large diligence teams for consistent returns

Harry Stebbings · Nov 3, 2023

Solo GPs specifically cannot provide real governance because they cannot sit on the number of boards their portfolio would require

You would have to be on too many boards at once

42:24 Solo gps cannot provide adequate governance across too many boards