What does it take for someone to develop and demonstrate skill as a venture investor?

Semil Shah · published Nov 21, 2022

Many managers in the last three or four years raised large debut or second funds without investment experience, skipping the proof-of-concept funds, and shouldn't be knocking on institutional LPs' doors yet

Capital acceleration let inexperienced managers raise big early funds; they haven't gone through the small proof-of-concept fund stage he did

22:18 Skipping proof of concept funds to raise large debut funds is premature for institutional lp backing

Harry Stebbings · published Nov 21, 2022

An AngelList logo list proves little because you cannot know whether someone is a good investor for ten years

Track record takes a decade to reveal itself, so a portfolio of great logos built through AngelList doesn't show much

23:01 An angellist logo portfolio proves little since investing skill only reveals over a decade

Jason Lemkin · published Nov 30, 2022

Seed investors have to learn how to lose money, and most only internalize that a 1x loss doesn't matter after they have big paper winners

He needed to be up ~10x on his early investments before he could accept losses; as a founder he had irrationally feared losing his VC's money even though Emergence was a 12x fund that wouldn't have cared

8:10 Accepting losses only becomes possible after experiencing large paper gains

Keith Rabois · published Nov 27, 2023

There is no reliable proxy for identifying a great investor in advance — the only way to tell is to give them reps and watch whether they pick founders with taste, close interesting deals, and see those companies show signs of life

Investing is like playing the guitar: you can't tell from reading a book, only from watching someone pick it up; and unlike executives, whom he can evaluate in thirty days, investor returns take six to ten years

52:13 Only watching someone actually invest reveals investing skill

Keith Rabois · published Nov 27, 2023

You don't need to lose $10-20M to learn investing — within twelve months you know whether you've made a good investment 90-99% of the time, even if the external world doesn't yet know

In practice signal arrives fast: they knew Traba was working by the second board meeting, and Ramp's signal came even before launch, prompting a double-down

53:03 No need to lose large sums investment quality is knowable within a year most of the time

Adam Fisher · published Jan 22, 2024

New investors should aim to get points on the board with actual exits rather than swing for the biggest possible outcome

Investing psychology matters: watching $30M go down the drain contaminates every subsequent decision, whereas an early up round and a 3x mark builds the confidence needed to invest well

65:33 New investors should prioritize actual exits over swinging for the biggest outcome to build confidence