40. "Patience and Proxies" (ep. 13 of the series "101 VC Core Principles")

40. "Patience and Proxies" (ep. 13 of the series "101 VC Core Principles")

Welcome to episode number thirteen of our series called “101 VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs, WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS”… Let’s dig in. First, number 49.Leadership should apply a "curiosity" lens to younger partners' unconventional deals rather than starting with judgment. Curiosity before judgment. When a junior partner brings an unconventional deal, senior leadership should first ask “what do you see that I don’t?” rather than defaulting to skepticism, because early pattern-breaking often looks wrong before it looks right. Greylock exemplifies this culture: the firm structures internal reviews around exploring a junior partner’s thesis with genuine curiosity before applying seasoned judgment, which is part of why it has successfully backed generational shifts across enterprise and consumer software rather than only reinforcing what senior partners already believed. Then, number 50. If a partner’s unusual approach is unsuccessful four times in a row, only then does the firm step in to suggest a change in method. Four strikes before intervention. Firms should give an unconventional investor multiple attempts, commonly cited as four, before stepping in, because pattern-breaking approaches often require repeated iterations before the model proves itself. Union Square Ventures’ early bets on “toy” categories like microblogging and social gaming were widely mocked before compounding into massive outcomes, illustrating why patient firms resist correcting a partner’s unconventional thesis after just one or two setbacks. Now, core principle number 51. Because the ultimate outputs (returns) take up to 15 years, VCs focus heavily on measuring inputs. Measuring inputs over 15-year horizons. Because true fund outcomes only materialize after a decade or more, VC firms substitute proxies, deal quality, founder access, diligence rigor, for the outputs they cannot yet observe. Greylock explicitly manages internal performance using input-based metrics rather than only long-term IRR, tracking things like sourcing quality and time invested per opportunity so partners get useful feedback long before an investment’s ultimate return is even knowable. Finally, number 52. Metrics to gauge the VC firm’s partners should not be individualized, as this can incentivize "bad behavior," such as calling non-investable founders simply to pad metric. Avoiding individualized metrics. When firms tie compensation or evaluation to personal call volume or meeting counts, partners are incentivized to hit numbers rather than find genuinely investable founders. SaaStr’s Jason Lemkin has publicly flagged how VCs who chase individualized activity metrics end up meeting founders who aren’t serious just to pad pipeline stats, exactly the “bad behavior” top firms avoid by evaluating judgment and founder relationships collectively rather than through personal quotas. Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices.vc [https://vertices.vc]. Thank you for listening. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit verticescapital.substack.com [https://verticescapital.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

39. "Stability and Compounding" (ep. 12 of the series "101 VC Core Principles")

Welcome to episode number twelve of our series called “101 VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs, WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS”… Let’s dig in. First, number 45.The stability provided by the partnership allows individual partners the necessary freedom to pursue highly volatile, risky decisions. Partnership stability enables bold bets. The structural stability of a long-term partnership creates the psychological safety for individual partners to make high-conviction, high-risk decisions without fear of institutional fallout. Benchmark's deliberately small, equal-partner model is the clearest example: because every partner has identical economics and a shared stake in the firm's reputation, there is no internal politics or power imbalance to stop one person from backing a deeply unconventional bet like Uber or eBay, the institutional ground beneath them is solid enough to absorb volatility.. Then, number 46. New leadership roles at VC firms typically maintain 95% of previous responsibilities, focusing primarily on investing and working with founders. Leadership transitions preserve investing identity. When a managing partner steps back, the role evolves but the core job, backing founders and making investments, barely changes, because the firm's value lives in the investment work, not the administrative title. Sequoia's 2025 leadership transition is a textbook example: when Roelof Botha stepped aside, Alfred Lin and Pat Grady took the steward role while Botha stayed on portfolio company boards, showing that new leadership at a top VC firm is less a restructuring and more a continuity of who is closest to founders and deals. Now, core principle number 47. VC firms must be committed to "consistent compounding", striving to improve across multiple dimensions every day. Consistent compounding. The best VC firms are not built on occasional greatness; they are built on relentless incremental improvement across sourcing, judgment, portfolio support, and LP relations. Union Square Ventures exemplifies this: since 2003, Fred Wilson and the partnership have compounded their network-effects thesis across three consecutive platform shifts, social, mobile, and crypto, sharpening their filter with each fund, which is why USV generated 10x+ on Fund I and replicated strong performance across multiple subsequent vehicles. Finally, number 48. While VCs have a "novelty gene" and enjoy the next new thing, the core business must be built on stability and continually perfected. Novelty gene, stable core. VCs are naturally drawn to the new, the emergent, and the paradigm-shifting, but that attraction only produces returns when it is grounded in a stable, repeatable operational core. Andreessen Horowitz thrives at chasing genuinely new categories, crypto, bio, AI, defense, yet it has maintained consistency through a shared platform, a coherent partner selection process, and a multi-fund structure that keeps the firm from being destabilized every time a new technology wave emerges. Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices dot vc. Thank you for listening. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit verticescapital.substack.com [https://verticescapital.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

38. "How the Firm Runs" (ep. 11 of the series "101 VC Core Principles")

Welcome to episode number eleven of our series called “1 O 1 VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs, WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS”… Let’s dig in. First, number 41.The VC firm’s priority sequence is Founders first, followed by LPs, then the VC firm itself, then the broader team, and finally the individual partner. Founders First, always. The priority sequence is not arbitrary. It is a practical statement that every resource, every decision, and every firm behavior should begin by asking what serves the best founders. Sequoia makes this explicit in its operating philosophy: when it launched $950 million in new early-stage funds in 2025, partner Roelof Botha framed it entirely around returning to backing promising founders at the earliest stages of creation, with LP returns and firm interests downstream of that commitment. Then, number 42. Partners are expected to adhere to core values (e.g., aggressive but humble, strong under scrutiny, demanding and supportive), which are formally reviewed. Core values under scrutiny. Articulating values like “aggressive but humble” or “demanding and supportive” only matters if the firm actually holds partners accountable to them in formal reviews. Pear VC is unusually transparent about this, publishing its core values explicitly, including “give before you ask,” “we over me,” and “honesty always”, which creates an internal standard that partners are expected to embody and be evaluated against, not just recite. Now, core principle number 43. The guiding philosophy for VC firm operations is “freedom within frameworks” to maintain discipline without stifling innovation. The most durable VC firms create enough structure to make consistent, rigorous decisions, while still giving partners the autonomy to act on conviction without bureaucratic drag. GEX vc describes this tension directly in its portfolio construction approach: its Investment Policy Statement acts as a decision-making filter rather than a rigid constraint, defining the rules of engagement while letting individual judgment determine which opportunities are worth pursuing. Finally, number 44. The key capabilities in the venture value chain are Sourcing, Picking, Winning, Building, and Harvesting. The full value chain. Winning in venture requires excellence across all five stages, Sourcing, Picking, Winning, Building, and Harvesting, because a breakdown at any one link destroys returns regardless of strength elsewhere. Harry Stebbings has explored this on 20VC, noting that many firms score highly on sourcing (8–9 out of 10) but slip to a 6 on picking, which is exactly the pattern that produces busy deal flow but mediocre fund performance, as good deal pipelines without rigorous selection still yield average outcomes. Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices dot vc. Thank you for listening. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit verticescapital.substack.com [https://verticescapital.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

37. Benchmark’s "great unfreezing": when Benchmark says Yes to scale

Benchmark’s shift matters. Benchmark’s first-ever growth fund is more than a sizing change, it is a signal that even a famously discipline-first franchise believes the market now requires more capital, more stages, and a broader platform. For LPs, the key question is not whether the move is “good” or “bad,” but whether the firm can preserve the return engine that made it exceptional while expanding into a different business model. What changed. Benchmark [https://www.benchmark.com/] closed commitments of $2 billion across two new funds, including a $750 million early-stage fund and a $1.25 billion later-stage fund, breaking a more than 20-year pattern of keeping vehicles near $425 million or below. TechCrunch [https://techcrunch.com/2026/06/03/benchmark-raises-its-first-ever-growth-fund-as-part-of-2b-capital-raise/] reports that the growth fund will make five to six larger investments in both existing portfolio companies and new startups, while the early-stage fund gives Benchmark more flexibility across seed, Series A, and Series B. The firm’s move follows a $3.25 billion return from Cerebras at IPO price and comes after a period of GP turnover, including departures by Miles Grimshaw, Sarah Tavel’s role change, and Victor Lazarte’s exit. What LPs should test. LPs should not treat “brand” as a substitute for strategy coherence. When a top-tier VC changes strategy, the first diligence question is whether the new fund architecture is a response to opportunity or a response to scale pressure: do the check sizes, ownership targets, pacing, and reserve policy still support the historical edge, or do they dilute it. LPs should also ask whether the new stage mix changes the firm’s decision rights and sourcing behavior, since later-stage investing often rewards different skills, timing, and governance than early-stage company building. Diligence points for LPs. Use a simple framework when a manager pivots: * Strategy fit. Does the new fund actually match the market the manager wants to win, or is it just capital chasing a hotter segment? * Ownership discipline. Can the firm still get sufficient entry ownership without overpaying as the fund gets larger? * Team stability. Has the partner bench changed in a way that supports the new strategy, or does the shift reflect succession churn? * Portfolio overlap. Are later-stage bets additive, or do they crowd out focus from the core fund? * Evidence of repeatability. Is there a demonstrated ability to win in the new lane, or just one breakout mark-up or liquidity event. Benchmark-specific read. Benchmark has two advantages LPs will notice immediately: an elite brand and a history of concentrated, high-conviction investing. It also has two risks that deserve scrutiny: the temptation to scale into a de facto platform business, and the possibility that AI-era capital intensity forces it into a style of investing that is less ownership-rich and less manager-controlled than its legacy model. The manuscript of the story is not “Benchmark forgot how to invest”, it is that the market it helped define may now be too expensive for the old playbook. How LPs should respond. For LPs, a strategy change is a moment to separate proof from promise. Back a manager’s evolution only if the new vehicle has clear underwriting, a stable team, disciplined fund sizing, and a believable path to preserving net returns after fees and dilution. In Benchmark’s case, the next data points that matter are deployment pace, pricing discipline, ownership levels, partner consistency, and whether the new growth fund produces the same quality of outcomes as the firm’s early-stage franchise. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit verticescapital.substack.com [https://verticescapital.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

36. "The Outlier Firm" (ep. 10 of the series "101 VC Core Principles")

Welcome to episode number ten of our series called “1 O 1 VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs, WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS”… Let’s dig in. First, number 37. Outliers are typically "spiky" in some direction but must possess a "heart of gold" to collaborate effectively in a team environment. Outlier partners are usually “spiky” in one dimension, technical depth, speed, or taste, but the best ones still have enough humility to work well with founders and teammates. The clearest real-world version of that is Founders Fund: it has repeatedly backed unusually hard, founder-driven companies like SpaceX and Palantir, which require partners who can be intense and opinionated while still collaborating with very atypical founders. Second, number 38. Outlier partners cannot be managed or told what to do. Outlier partners cannot be managed like normal employees; they need trust and wide latitude because the best VC decisions are made quickly, under uncertainty, and often against consensus. GV is a strong example: its decision process has been described as intentionally structured to reduce hierarchy by gathering opinions quietly before discussion, which is exactly what you do when you know seniority can distort judgment. Third, number 39. Influence within the firm should be awarded based on expertise, not on hierarchy or tenure. Influence inside a VC firm should go to the person with the deepest relevant expertise, not the longest tenure or loudest title. At General Catalyst, the power of its AI and software practice has increasingly come from partners with the sharpest category-specific insight, which is why a firm can keep winning in new waves by letting the person closest to the problem lead rather than defaulting to seniority. Finally, fourth, number 40. The VC business adheres to the principle that it is only as good as its next investments. A VC firm is only as good as its next investments because yesterday’s wins do not create tomorrow’s returns. The most vivid example is Tiger Global’s venture platform: it looked unstoppable during the 2021 boom, but the next year’s marks and the 2022 selloff showed how quickly a fund’s reputation can reset when the next portfolio cycle is weaker. Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices.vc [https://vertices.vc/]. Thank you for listening. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit verticescapital.substack.com [https://verticescapital.substack.com?utm_medium=podcast&utm_campaign=CTA_1]