On December 31, 2025, I retired after being involved in the technology investment space for 30 years and 23 years after founding Vintage Investment Partners (LinkedIn).
At my final Vintage annual meeting as Managing Partner, I presented some learnings from my period as a venture investor. I thought it might be helpful to convert that presentation into a series of three blogs. This is the second of the three.
I made a lot of mistakes as a venture investor. Fortunately, the returns of the winners exceeded the many losses from the crappy investments. But, from the 32 years of investing, there were six big lessons I learned.
Lesson #1 – Size Does Matter – Don’t Invest Unless You Genuinely Believe that the Investment Could be a Fund Returner [at Least]
Vintage is a fund of funds, secondary fund and late-stage direct investor in tech companies. I looked at all the venture funds we invested in across the last 23 years.
Every fund that generated a 3x net return to its LPs had at least one company that by itself returned 1.7x the fund.[1] The average multiple on a Fund Returner was 29x.[2] Investing only in potentially huge companies and owning a meaningful piece of them is fundamental to venture returns. Period. I sometimes forgot that.
Learning #2 – Not Every Company with Revenue, Exits – In Fact, Most Don’t
There is an assumption that every company that has revenues will eventually be sold (I made that assumption a bunch of times). That is simply wrong. Buyers only buy companies that they see can be huge or are so strategic that they have no choice but to buy. Relative to the number of companies funded, few M&A deals in venture-backed companies actually happen…far fewer than people think. In fact, as we see it, today, there is over $1.1 trillion! of value left on the balance sheets of venture funds raised prior to 2019. Venture managers need to be realistic and honest with themselves and try to merge what is left with another startup that has better prospects or sell the less exciting holdings for whatever they can get in a secondary. Hoping for a miracle is not an investment strategy.
Learning #3 – What is Important is the Market 5 Years from Now – Not What it is Now
There is way too much “jumping on the bandwagon” or reactive investment in the venture market. In venture investing, one needs to invest in a transformative sector ahead of the curve. If Gartner or someone else has already named the category, it may already be too late. The great investors are proactive about sectors and spaces and not reactive; they invest before there is a market that is proven. In many cases, their companies create the market. Imagine having been an investor in OpenAI and Anthropic before everyone jumped into AI or an early investor in Coinbase or in Salesforce before people caught onto crypto or SaaS. The great seed and early-stage investors do this. I looked in the mirror and realized that I did not have those skills, so I focused on late stage. Every investor should make their own honest self-assessment.
Learning #4 – Don’t Invest Unless You Think that the Founder Can Scale
Looking back at my bad investments, the most common mistake was falling in love with the tech or the market and not reading the founder right. We looked at all the exits above $500 million in Israel over the last decade and found that 91% of them were managed by the founder CEO at the time of the exit[3]. Putting an external CEO on top of, or in place of, a founder rarely works. And if you look at the US and Europe, you see largely the same thing. Every one of the “Magnificent Seven” was built by the founder CEO (in the case of Google, the founders took over the CEO role later) into multi-billion dollar businesses before stepping aside or retiring (if they retired…). If you do not believe that the founder can scale, don’t invest.
Learning #5 – Founder Friendly Does Not Mean Always Agreeing with the Founder
The formal definition of a board of directors is: “A board of directors in a corporation has the overall responsibility for overseeing the company’s activities and performance, primarily acting in the best interests of the shareholders. They provide strategic guidance, appoint and oversee senior management (including the CEO), and ensure the company’s compliance with laws and ethical standards.[4]” A board member is not a cheerleader. She is not someone who sits on 25 boards, comes to the odd board meeting for an update and attends in order to be a “yes-person”. On the other hand, adding value does not mean micromanagement. If the board has to micromanage, the investment was a mistake in the first place. What a board should do is respectfully challenge management to think carefully about strategy and to ask questions of the CEO and management team – to “put up a mirror in front of them” – so that THEY come to the right decisions. When I look back at my career, this was one of the hardest balancing acts.
Learning #6 – Trust Your Gut (and Due Diligence) and Not Only What Others Say
One of my worst investments was made following two of the best venture brands in the industry. Because they were there and were both taking at least their prorata, I cut corners on my own due diligence. It was a big mistake. We all have a tendency to love something because “we hear good things in the (venture) market” about a company. We also see people reject deals because so and so “big brand fund” is less excited. We are all paid a lot of money to make our own judgements – others’ views are just an input, but no more than just an input. Good investors trust their own gut feelings based on deep due diligence.
Some Final Thoughts
The venture industry is manic depressant. Sometimes the industry chatter claims that “this time it is different” and every valuation needs to be at least $1 billion and then the next day the industry chatter is “the model is broken” and “I better find a real job”. I learned that things are never as bad as the “industry” says, nor as good as the “industry” says (In fact, I short the markets when everyone says this time it is different, and buy the markets when everyone says the model is broken). A former mentor of mine said that investing is 95% luck and 5% due diligence, and he would love to trade the 5% of due diligence for another 5% of luck. Unfortunately, there is no such trade out there. My best take away from all my mistakes is do your own homework, trust your gut, be sure that you love the founder and really, really believe in them, build a thesis of where the world is going and invest on that thesis, respectfully say to the founder what you believe, and above all, put everything, especially yourself, the “industry” and the market into perspective. And with a lot of luck (and some due diligence), maybe it will all work out in the end.
Disclaimer: 1. This marketing communication is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein, reflect the subjective judgments and assumptions of the authors only, and do not necessarily reflect the views of [Vintage]. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. Data and analysis does not represent the actual, or expected future performance of any investment product. Information, including that obtained from outside sources, is believed to be correct, but we cannot guarantee its accuracy. This information is subject to change at any time without notice.2. This information is subject to change at any time without notice. 3. Any investment that has the possibility for profits also has the possibility of losses, including the loss of principal. 4. Descriptions assume normal market conditions. Numbers are approximate.5. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.6. Gross returns are net of trading costs. Net returns are gross returns less effective management fees.7. Any investment that has the possibility for profits also has the possibility of losses, including the loss of principal.
[1] SOURCE: Vintage Investment Partners, sampled out of all Vintages Portfolio Funds in the past 20 Years; Data as of 2Q 2025
[2] SOURCE: Vintage Investment Partners, sampled out of all Vintages Portfolio Funds in the past 20 Years; Data as of 2Q 2025
[3] SOURCE: Vintage Investment Partners, sampled out of all Vintages Portfolio Funds in the past 20 Years; Data as of 2Q 2025
[4] Investopedia. (n.d.). Board of directors. In Investopedia. https://www.investopedia.com/terms/b/boardofdirectors.asp
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