Vertices Capital

Welcome to episode number five of our series called: “One O One VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS”.

Today we’re going to explore four new core principles:

Number 17. Strong “yes” or strong “no” positions are much better indicators than lukewarm consensus.

Number 18. If a deal sees partners split, for example, three partners rate it a “nine” (high conviction) and three rate it a “one” (low conviction), the investment should probably be made.

Number 19. The presence of conviction (the “nines”) is a far more powerful signal than the presence of dissent (the “ones”).

Number 20. VCs must embrace volatility in their decision-making because the optimal outcome is rarely found in the middle ground where everyone agrees.

Let’s dig in…

First: Strong “yes” or strong “no” positions are much better indicators than lukewarm consensus. Andreessen Horowitz (a16z) explicitly avoids lukewarm consensus by passing on deals where every partner agrees, operating on the premise that universally accepted ideas have already lost their alpha. For example, a16z’s highly polarizing early investment in Coinbase in 2013 was driven by a strong “yes” from Chris Dixon, despite widespread market skepticism that associated cryptocurrency purely with illicit activities.

Second: If a deal sees partners split, for example, three partners rate it a “nine” (high conviction) and three rate it a “one” (low conviction), the investment should probably be made. Top-tier partnerships like Benchmark operate on a “champion model” where a split room is viewed as a prerequisite for a breakout company rather than a reason to pass. When Bill Gurley sponsored Uber’s Series A at Benchmark, the partnership was not in unanimous agreement since many viewed the startup as merely a niche black-car service, but his “nine” rating pushed the deal through to a historic return.

Third: The presence of conviction (the “nines”) is a far more powerful signal than the presence of dissent (the “ones”). Dissent usually identifies obvious downside risks, but venture returns are generated entirely by a single partner’s unwavering conviction in the non-obvious upside. When Jeremy Liew of Lightspeed Venture Partners invested $485,000 into Snapchat’s seed round, his deep conviction overrode significant dissent from critics who dismissed the product as a trivial disappearing photo app, ultimately generating a $2 billion return for the firm.

Fourth: VCs must embrace volatility in their decision-making because the optimal outcome is rarely found in the middle ground where everyone agrees. The middle ground optimizes for safety and incremental growth, which mathematically guarantees mediocre fund performance in an asset class defined by power laws. Founders Fund embraced extreme volatility in 2008 by investing $20 million into SpaceX when the company was nearly bankrupt after three failed launches, a highly non-consensus bet that middle-ground investors entirely avoided, but which yielded one of the most valuable private companies in history.Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices.vc. Thank you for listening.

GPs often talk to prospective LPs who have strong misconceptions about minimum ticket sizes to become an LP in VC funds.

In venture capital, the assumption that LP commitments must start at €250k or higher often comes from how larger funds are structured.

In micro pre‑seed funds, this logic shifts. A €10M vehicle typically runs on lean management fees, and low overhead.

Within that structure, a €50k ticket can represent 0.5 to 1% of the fund, a meaningful share that integrates cleanly into the economics.

Smaller minimums don’t imply less professionalism. They reflect the capital intensity of the strategy and the fund’s design choices.

There is no operational reason a €50k LP can’t sit alongside larger investors if reporting, capital calls, and governance are standardized.

For GPs, the trade‑off is administrative: more LP accounts to manage, but often stronger alignment and access to relevant networks.

In short, the size of the ticket is a function of fund architecture, not of investor profile or sophistication.

If you want to learn more about VC funds economics, contact us at Vertices Capital (vertices.vc).

Welcome to episode number four of our series called “One O One VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPs, WILLING TO UNDERSTAND HOW VC REALLY WORKS”…

Today we’re going to explore four new core principles:

Number 13: If a company runs, VCs must have strong ownership, a small investment of $1 million in a large fund is insufficient…

Number 14: Internal data at VC firms shows that consensus versus non-consensus decisions does not matter at all…

Number 15: The presence of conviction is the only factor that matters…

Number 16: If every partner rates an investment a “six” (on a 0 to 10 scale), the investment should probably not be made because it is consensus without conviction.

Let’s dig in…

First: Ownership Must Be Meaningful..

When a company becomes a 100x outlier, a token-sized investment returns almost nothing to the fund as a whole, making meaningful ownership a prerequisite for LP impact. Founders Fund exemplified this by placing 33% of its third fund into Palantir and 20% of a $500 million fund into Airbnb, ultimately holding 12.7% of Palantir at IPO worth ~$1.4 billion and 5.5% of Airbnb worth ~$5.5 billion, stakes only possible because of concentrated, conviction-sized positions, not safe $1 million diversification checks.​..

Consensus vs. Non-Consensus Is Irrelevant..

Internal data from top VC firms consistently shows that whether a deal is consensus or non-consensus within a partnership has no predictive power over returns; the deciding variable lies elsewhere. Cambridge Associates research confirms this: the investments that generated the most exceptional returns were often those that initially struggled to attract investor interest, while Correlation Ventures found that non-consensus bets produce 3–5x higher returns than consensus deals, not because being contrarian is inherently virtuous, but because consensus deals are already priced to consensus.​..

Conviction Is the Only Factor..

What actually separates winning investments from mediocre ones is the depth of a single partner’s conviction, even when peers disagree. Peter Thiel’s $500,000 Facebook investment in 2004 as the company’s first outside backer, made when the product was dismissed as a college social network with no clear business model, turned into over $1 billion, not because the deal was consensus, but because Thiel had absolute conviction in Zuckerberg’s capacity to build an enduring platform.​.

The “Six” Is a Trap..

A deal where every partner rates it a six is the most dangerous kind: it clears every internal threshold while belonging to no one, generating no single champion willing to fight for it under adversity. SoftBank’s Vision Fund demonstrated this at scale, dozens of investments made on broad market consensus and trend-chasing rather than deep partner conviction, producing catastrophic losses in WeWork ($47 billion valuation to bankruptcy), Oyo, and Katerra, precisely because the conviction required to stress-test assumptions had been replaced by collective comfort…Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices.vc. Thank you for listening.

Welcome to episode three of our series called "One O One VC CORE PRINCIPLES FOR NEW LPs WILLING TO UNDERSTAND HOW VENTURE CAPITAL REALLY WORKS".Today we're going to explore four new core principles:Number 9. VCs aim explicitly for net multiple money returns…Number 10. In a typical fund of 25 to 40 investments, four to five investments should return 10x or more…Number 11. Historically, two to three of those 10x investments must result in a $100 million or a billion-dollar gain to yield a good fund…Number 12. Even the best-performing funds often have a high write-off rate (for example, 50%), meaning VCs must be comfortable with being wrong half the time.Let's dig in…First, Net Multiple Focus…VCs target net multiples, actual cash returned to LPs after fees and expenses, as the primary success metric, not IRR or TVPI, to ensure real economic value creation. Union Square Ventures' $20 million investment in Twitter in 2008 delivered a net multiple exceeding 100x through its 2013 IPO, generating hundreds of millions in distributions that more than repaid the fund despite high fees and a volatile timeline.​..Four to Five 10x Returns.In a standard 25 to 40 company fund, four to five investments must achieve 10x or higher returns to drive top-quartile performance amid inevitable losses. Lightspeed Venture Partners' early fund exemplified this with 10x+ exits from Snap, MuleSoft, and Nutanix among 30+ bets, where these few winners generated the bulk of value while the majority returned less or zero.​​..$100M+ Blockbuster Wins…To deliver a strong fund overall, historically two to three of those 10x investments need to produce $100 million or billion-dollar gains for the fund, creating outsized distributions. Accel's investment in Facebook delivered over $9 billion in gains from a $12.7 million stake, while Slack and Atlassian added another $100 million+ each, turning the fund into a multi-billion-dollar success story.​​..Embracing 50% Write-Offs…Top funds routinely write off 50% or more of investments, requiring VCs to normalize being wrong half the time without losing conviction on winners. Sequoia's legendary 2008 fund wrote off 50% of its portfolio to zero, yet Airbnb, Unity, and Dropbox generated returns exceeding 100x each, repaying the fund multiple times over.​​..Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: https://vertices.vc. Thank you for listening.

Welcome to episode two of our series called "One O One VENTURE CAPITAL CORE PRINCIPLES FOR NEW LPS WILLING TO UNDERSTAND HOW VC REALL Y WORKS".Today we're going to explore four new core principles:Number 5: Success as a VC requires active participation in the business of risk-taking..Number 6: The market size dictates how big a company can get.Number 7: The founder determines how big the company will get.And Number 8: When evaluating a market, VCs focus on its projected size in 10 or 20 years, asking the "why now" question rather than assessing what exists today.Let's dig in.Success in venture capital requires embracing risk as a core operational discipline, not merely accepting it as a byproduct of investing. Benchmark Capital epitomized this in 1997 by investing $6.7 million in eBay when the company had just $400,000 in monthly revenue and critics dismissed online auctions for "broken laser pointers" as too niche to scale, yet the bet returned over 600x and defined the firm's reputation.​​The total addressable market sets an absolute ceiling on company value, regardless of execution quality. When Uber launched in 2009, initial investors saw a $4 billion black-car market, but Benchmark partner Bill Gurley recognized that superior service could expand TAM to include car ownership replacement, a $150-750 billion opportunity, fundamentally reshaping the investment thesis and Uber's eventual valuation trajectory.​​Founders determine whether a company reaches its market ceiling or stalls far below it, making founder quality the decisive variable within any TAM. Brian Chesky transformed Airbnb from a home-rental platform into a $98 billion company by relentlessly expanding the vision to include experiences, services, and hotels across 220 countries, demonstrating how founder ambition unlocks successive phases of growth that less determined operators would never attempt.VCs evaluate a market's size 10 to 20 years ahead and ask "why now" to identify inflection points, ignoring current scale. Sequoia's 2011 investment in WhatsApp exemplifies this: while a dozen ad-supported messaging apps competed in tiny markets, Sequoia saw mobile internet penetration in emerging economies creating a multi-billion-user global communications platform, leading to a 50x return when Facebook acquired WhatsApp for $19 billion in 2014.Stay tuned for our next episode, and meanwhile, you can reach out to us, Vertices Capital, on our website: vertices.vc. Thank you for listening.

Welcome to episode one of our new series, “101 Venture Capital Core Principles for New LPs Willing to Understand How VC Really Works.”

​Today, we’re going to explore the first four core principles:

Number 1: Venture capital is fundamentally the “outlier business”; the objective is not consistency.​

Number 2: The goal is to find the two, three, or four outliers in any given year that will produce the most important companies of tomorrow.​

Number 3: Outsized returns for the limited partners, the LPs, depend on finding the most important companies of tomorrow.

​and, Number 4: A VC firm does not serve its mission for LPs if it is only achieving “doubles and triples.”

​Let’s dig in.

Venture capital is an outlier business because almost all the economic value of a fund comes from a tiny handful of companies, not from steady, repeatable wins each year. One Google or Airbnb can repay an entire portfolio of mediocre or failed bets, so a single outlier can more than compensate for dozens of write‑offs, making volatility, not smoothness of returns, the structural norm in this asset class.

​The practical job of a VC partnership is therefore to position itself each year to back the two, three, or four companies that could become the next Stripe, OpenAI, or Datadog, even if that means passing on many “good” but non‑transformational startups. Sequoia’s early conviction in companies like WhatsApp and YouTube, inside a huge and noisy deal flow, shows how a few bold, non‑consensus bets in any given vintage can dominate the financial outcome of an entire fund.

​Because of this power‑law dynamic, outsized returns for LPs only materialize when a fund owns meaningful stakes in companies that go on to redefine markets or create entirely new ones. Early investors in businesses like Airbnb or Shopify did not outperform public benchmarks because their portfolios were broadly “solid,” but because they captured equity in one or two epoch‑defining companies that compounded far faster than the rest of the portfolio combined.

​A VC firm that reliably produces only “doubles and triples” effectively optimizes for comfort and optics rather than for the asymmetric upside LPs actually need from the asset class. In practice, a portfolio full of safe, modest winners may look prudent on a deal‑by‑deal basis, but it will usually underperform top‑quartile venture funds that tolerate a 50% write‑off rate in exchange for exposure to one, two, or three outliers that return the entire fund and more.

​Stay tuned for our next episode. In the meantime, you can reach out to Vertices Capital on our website: vertices.vc. Thank you for listening.

Today, we’re thrilled to announce the release of our brand-new white paper, titled “101 Venture Capital Core Principles for New LPs Willing to Understand How Venture Capital Really Works.” This comprehensive guide is designed to demystify the often opaque world of venture capital, offering fresh insights tailored specifically for emerging Limited Partners (LPs) who want to grasp the realities behind the headlines.At Vertices Capital, we’ve poured our expertise into this white paper, that breaks down 101 essential principles that reveal how VC truly operates, from deal sourcing and evaluation to portfolio management and exit strategies. Whether you’re a family office, high-net-worth individual, or institutional investor dipping your toes into VC, these principles provide actionable clarity to navigate commitments with confidence.​Complementing the white paper, we’re launching a dedicated short-form podcast sub-series with the same title: “101 Venture Capital Core Principles for New LPs Willing to Understand How Venture Capital Really Works.” Each bite-sized episode will dive into 2 to 4 core principles, unpacking them. Episodes will roll out gradually.In a landscape filled with hype and complexity, understanding VC’s core principles empowers LPs to make informed decisions, avoid common pitfalls, and align with VC funds in high-trust ecosystems. Download the white paper today from our website and subscribe to catch the first episode dropping soon. Thanks for listening.​

Family offices and other LPs should underwrite both the GP and the thesis, but when forced to choose, the repeatable quality of the GP and firm platform matters more than any standalone fund thesis. Venture is structurally hard to time, so the core of the decision should be: “Is this a manager to back across multiple cycles?” rather than “Is this thesis perfect for this vintage?”.​

A fund thesis helps an LP understand where risk is being taken: sector focus, stage, geography, ownership targets, and value‑add model. It provides a framework to judge whether the GP’s strategy fits the family office’s mandate, risk budget, and existing exposure.​

The GP, however, controls sourcing, selection, portfolio construction, follow‑on discipline, and exits, and is ultimately responsible for whether the thesis is executed well or quietly abandoned when the market moves. Empirically, persistent outperformance in private markets is more associated with manager skill and process than with any one “hot” theme, which is why sophisticated LPs focus on GPs who deliver across cycles rather than one lucky vintage.​

When conditions change, a rigid thesis can become a liability, while adaptable GPs update how they apply it (e.g., entry pricing discipline, round positioning, reserve strategy). LPs are effectively buying a long‑dated relationship, so attributes like team stability, decision‑making culture, governance, and alignment (GP commit, carry, recycling) tend to drive long‑run outcomes more than whether a memo was AI‑ or climate‑focused.​

For family offices with limited bandwidth, a trusted GP also functions as an outsourced innovation radar and selection engine, which is often more valuable than trying to independently pick among shifting theses every cycle. This is why many institutional LPs will re‑up with core managers through style drift within defined bounds, but rarely tolerate degradation in team quality, processes, or alignment.

Venture is a power‑law asset class at both the company and vintage level: a small subset of companies and a small subset of vintages drive disproportionate returns. Because it is impossible to know ex‑ante which vintage will contain the “power‑law” opportunities, trying to time commitments around macro cycles or public market sentiment is structurally unreliable.​

Analyses from private‑markets researchers show that skipping vintages to “wait for a better entry point” typically leaves portfolios under‑allocated for years and can permanently reduce compounded returns, even when later commitments are increased. VC deployment also lags fundraising and macro signals, so by the time a family office feels comfortable “getting back in,” many of the best deals in that cycle may already be priced and allocated.​

The practical implication is that VC is an asset class that rewards consistent pacing and diversification across vintage years, not tactical market timing. Maintaining a steady commitment plan smooths entry valuations, captures opportunities in both hot and cold markets, and allows distributions from older funds to support new commitments.​

For a given GP, it is unrealistic to expect every fund to be a top performer; even strong managers will have a “bad” vintage due to timing, sector cycles, or idiosyncratic portfolio outcomes. LPs that commit to several consecutive funds from the same high‑conviction GP are effectively averaging across the manager’s opportunity set and increasing the chance of being exposed to their standout vintages as well as their weaker ones.​

For family offices, the practical hierarchy often looks like this:

* First, decide whether to have a strategic, long‑term VC allocation at all, given liquidity, governance, and risk appetite.​

* Second, select a small set of GPs whose teams, incentives, and processes are trusted enough to back through multiple vintages.​

* Third, ensure each GP’s thesis is coherent, differentiated, and complementary to the overall portfolio—but not so narrowly interpreted that a thesis tweak becomes a reason to abandon a good manager.​

Framed this way, a family office is not trying to time the VC market but to build durable GP relationships and maintain exposure across cycles, accepting that there will be weaker funds along the way while aiming for strong long‑run, multi‑vintage outcomes.​

LP Advisory Committees (LPACs) serve as essential governance bodies in VC funds, comprising select LPs who provide non-binding input on key decisions like conflicts of interest, extensions, or key-person events. Family offices gain leverage by actively participating, reviewing transactions where GPs face potential self-dealing, such as investing in related entities or GP-led secondaries. This oversight ensures fairness without micromanaging daily operations.​Single and multi-family offices (S/MFOs) benefit most in new and emerging manager funds (Funds I-III), where limited track records heighten risks of misaligned incentives. Requesting LPAC seats via side letters allows S/MFOs to vote on waiver approvals, scrutinizing processes for independent valuations and competitive bidding. Proactive involvement signals sophistication to GPs while protecting capital through collective LP wisdom.​GPs typically grant LPAC seats to anchor LPs committing 5-10%+ of fund size or strategic investors offering long-term partnership potential, prioritizing those with VC expertise over pure capital size. S/MFOs should demonstrate value through prior co-investments, industry networks, or governance experience. S/MFOs should avoid demanding seats in over-anchored funds (>50% closed), as GPs reserve them for influential minority holders to maintain balanced representation.​Overly aggressive LPACs risk alienating GPs, stalling portfolio execution, S/MFOs should emphasize advisory over veto power per standard LPAs. In European funds, jurisdictional nuances like Swiss or Luxembourg rules demand legal review to maintain limited liability status.

Success hinges on preparation: review quarterly reports deeply to spot patterns before conflicts arise. S/MFOs who are LPAC members, should build consensus, by collaborating with fellow LPs pre-meeting to align on red flags, amplifying influence in funds with lean governance structures.​

For Family Offices new to being LPs in VC, they should realize that a strong focus should be on underwriting the GPs (general partners).

1 - Family Offices shouldn’t just look at quantifiable data such as fund size, they should scrutinize the GPs’ core driver. The most enduring GPs are motivated by an inherent purpose, ie a will to win rooted in a love for innovation, viewing wealth as a by-product of VC. S/MFOs must be wary of poor stated purposes, such as answers like ‘all my friends say I should start a fund because my dealflow is too cool’.

2 - Diligencing the GPs’ character must be balanced, between verbal inquiry (”tell me”) and observation (”show me”). It is crucial to look beyond the pitch that has been refined after 10s of prospective pitches.

3 - S/MFOs, when considering an LP commitment, should collect many perspectives beyond the GPs’ own narrative. Talking to people the GP interacted with during these times is often very telling about how they reached their decision to start a VC firm and a fund.

4 - Family Offices should analyze the GPs’ personal history and pay special attention to transition periods following major accomplishments, such as a prior exit as a founder.

5 - Observing how they treat people in service environments can reveal how they value themselves in society. It may sound naive but understanding how a GP treats others often suggests what a business partnership will be like, and is, from the S/MFO, a testament that they are thinking “relationship from first principles”.

This is not an exhaustive list of course. This list particularly applies to diligencing new/emerging GPs in Venture Capital.