You Don’t Need to Predict the Next Great Startup.

My answer starts with a question of my own: How are you building your portfolio?

I got my first job in venture capital in 1986. I’ve spent the years since investing, starting companies, and watching very smart people get the future wrong. Including me.

After 40 years, my approach comes down to three things: build a large portfolio, assemble it over time, and invest alongside people who earn access to unicorn founders and best start ups.

Easy to say. Harder to do. And considerably more useful than another hot tip.

1. Respect the math. You need more companies than you think.

Venture capital is a power-law business. A relatively small number of investments can account for a large share of the returns. Some (most) ventures fail. Some survive without accomplishing much for their investors. A few become enormously valuable.

The problem is that nobody hands you the list in advance. Like Steve Jobs said: “the dots only connect looking back”.

People like to imagine that enough intelligence, research, or conviction will solve this. Those things matter. Egos are involved. We spend our working lives evaluating businesses, teams, and markets. But there are too many moving parts to eliminate uncertainty: competition, timing, execution, financing, regulation, and plain old luck.

A great team can run into a wall. An unlikely company can find a market nobody understood. You can be a tad early — or late. Predicting exactly how it all unfolds is hubris.

So you need enough opportunities for something exceptional to happen.

My personal shorthand it to target a portfolio of roughly 100 to 150 companies, assembled over four or five years. That isn’t a magic number. It’s a practical way to think about giving the math room to work. You need shots on goal.

Look at the distinction in the chart. In this model, adding companies increases the likelihood of some return outcomes, while the most extreme outcomes remain uncommon. More companies don’t magically make every investment better. They change the portfolio’s exposure to an unpredictable distribution of results.

Three startups you really believe in are three bets. Even if one has a terrific pitch deck.

For most people, getting to 100 or 150 companies one investment at a time is wildly impractical. Finding opportunities, evaluating them, handling the paperwork, and following the businesses could become your full-time job.

That’s one reason I think diversified funds belong at the center of an individual’s venture portfolio. You can still make individual investments. Just understand what job each investment is doing.

2. Diversify beyond the company count.

You could own 100 companies and still have a concentrated portfolio.

If they’re all early-stage AI companies funded in the same year by the same group of investors, you’ve repeated a lot of the same assumptions 100 times.

I want diversification across several dimensions.

The principle is straightforward: don’t let one view of the future determine your entire outcome.

I can be enthusiastic about a technology and still want a portfolio that allows me to be wrong about parts of it. In fact, I think that’s a healthy way to invest.

3. Give yourself an annual budget. Then keep showing up.

A venture portfolio takes years to build and years to mature.

That matters because people naturally want to do the opposite. They get excited, put a lot of money to work at once, and then wait. Or they decide they’ll start when the headlines improve and valuations make sense.

Good luck picking that moment consistently.

First, understand what you’re buying. These are long-term investments. A venture fund commonly has a term of about ten years, and capital can remain tied up longer.

Early losses can show up well before successful companies have had time to develop. As I like to say, lemons ripen first. Building something valuable takes longer.

Personally, I like an investment that doesn’t invite me to stare at my phone all day. I’m skeptical that checking a price every 15 minutes improves anyone’s judgment.

But the absence of a trading button doesn’t remove the risk. Companies can fail, capital can be lost, and distributions don’t arrive on your preferred schedule. Plan around that reality.

My preference is an annual venture budget: an amount that fits your financial circumstances and that you can commit for the long term. Then build exposure across successive investment years, often called vintages.

This spreads your entry points across different financing environments and business conditions. It also keeps one burst of enthusiasm from becoming your entire venture strategy.

Over time, distributions from older investments may help fund new commitments. That’s a possibility to plan for, rather than a schedule to depend on.

The discipline is to choose a sustainable commitment, build over time, and give the companies time to do the work.

4. Access matters. The best companies are funded by established VC firms.

Exceptional founders with businesses that are working often have choices about whose money they take.

Think of a high school basketball All-American choosing a college. There may be hundreds of programs, but the serious conversation happens with a much shorter list. The player picks.

A venture partner can help a founder recruit, attract customers, raise the next round, and establish credibility. The relationship is about considerably more than the check.

That’s why I care about investing alongside strong venture investors. They can have access to opportunities that never make it into the average individual’s inbox.

The historical performance data also shows why it’s worth paying attention to investment teams.

There’s a wide gap between outcomes. Buying something labeled “venture capital” tells you relatively little about what you’ll experience.

But don’t reduce partner selection to collecting famous logos.

Some investors have extraordinary expertise in a particular niche. They may understand space infrastructure, healthcare, or a specialized industrial market better than a much more recognizable firm.

And within a firm, the individual matters. Who actually knows this market? Who has earned the founder’s trust? Who will pick up the phone when something breaks?

The name on the back of the jersey matters too.

Strong partners don’t make an investment safe. Their involvement doesn’t excuse us from evaluating the company, the terms, and the price. But access and relationships belong in the investment process. They’re a big part of how this business works.

Know yourself.

People want different relationships with their venture portfolios.

Some love evaluating individual companies. They want to read the materials, meet founders, and make their own decisions. Others want a diversified fund, one annual commitment, and time to spend on the rest of their lives.

Most of us land somewhere in the middle: diversified funds at the center, with selected investments in sectors or companies they have conviction about.

That middle approach is broadly how my family thinks about it.

The right structure depends partly on knowing yourself. How much time will you give this? How much uncertainty can you tolerate? How much capital can you leave invested for years?

Be honest. A strategy that requires you to become a part-time venture capitalist won’t work very well if you have no interest in doing the job.

Where I come out

I founded Alumni Ventures because I had this problem myself. When I wasn’t investing full time, getting enough access to enough quality venture opportunities was impossible — not hard — impossible. I decided to spend the rest of my life focused on solving this for myself and others.

We built AV around a point of view I still hold: individuals should be able to build a substantial, diversified venture portfolio over time, alongside established VC firms. Together, we could all do better in this most profound asset class.

I’m optimistic about what entrepreneurs can accomplish, especially with the tailwinds of unlimited intelligence at their back. Small groups of people doing difficult things are how a lot of the world gets better. It’s worth doing.

But optimism about innovation is only the beginning of an investment strategy.

You still need breadth. You still need patience. You still need discipline about the opportunities, partners, and prices.

So when someone asks me which startup they should invest in, I usually have a question first:

What does the rest of your portfolio look like?

This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication is neither an offer to sell, nor a solicitation of an offer to purchase, any security. Such offers are made only pursuant to the formal offering documents for the fund(s) concerned, and describe significant risks and other material information that should be carefully considered before investing. For additional information, please see here. Achievement of investment objectives, including any amount of investment return, cannot be guaranteed. Co-investors are shown for illustrative purposes only, do not reflect all organizations with which AV co-invests, and do not necessarily indicate future co-investors. Example portfolio companies shown are not available to future investors, except potentially in the case of follow-on investments. Venture capital investing involves substantial risk, including risk of loss of all capital invested. Diversification cannot prevent investment loss; it is a strategy to mitigate investment risk. This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.