How to optimise for success in VC

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You’re probably not the next Doug Leone (the Warren Buffett of private markets). And that’s okay. Most venture investors believe they have an edge. Maybe it’s their industry experience, their network, or the fact that founders desperate for funding slide into their DMs asking for advice.

The belief is this: “I can pick winners because I have access others don’t.” It’s a compelling story, and an understandable one. After all, we’re hardwired to trust our own judgement, especially when we’ve had success in other parts of life. But in venture capital, this kind of thinking is more dangerous than it seems. This fallacy, the myth of being an “expert picker”, is one of the most common traps in early-stage investing. It’s human nature to overestimate our abilities. Psychologists call it the Dunning-Kruger effect: the less we know, the more confident we are in our knowledge. In venture, this manifests in the form of concentrated portfolios, where investors back only a handful of companies under the belief that their insight or access will uncover the next unicorn. The data, however, tells a very different story.

Venture returns follow a power law. That means the vast majority of your returns will come from a tiny number of companies, often just one. That one company doesn’t just outperform the others, it dwarfs them. But here’s the kicker: even the best VCs in the world can’t reliably predict which startup will be that company. What they can do, and what we must do, is design a portfolio strategy that gives us the best chance of backing one. That starts with volume. Data from AngelList shows that the optimal portfolio size for a seed-stage investor is around 50 companies. At that point, your probability of losing money drops below 5%. Even more importantly, your odds of achieving a 3x return, the kind of return that justifies the risk of illiquidity, rise dramatically.

This is what diversification does: it gives you the best shot at catching the kind of outlier that changes everything. And in VC, catching that one outlier is the whole game.

For small-scale investors, this doesn’t mean trying to back 50 companies overnight. It means approaching startup investing with discipline, patience, and consistency. The goal isn’t to sprint, it’s to build over time. Allocate a fixed amount to each investment. Spread those investments across years. Diversify across industries, stages, and geographies. Don’t swing harder, take more swings. Venture isn’t about conviction in a single deal; it’s about conviction in the strategy.

It also means resisting the temptation to believe that access alone is a strategy. Unless you have the same access as someone like Doug Leone, you’re not playing the same game. Access isn’t a moat for individual angels. Even great founders make bad calls. Even hot rounds flame out. If you bet big on a small number of companies because you believe you’re seeing the top 1% of opportunities, you’re ignoring the fact that everyone thinks they’re seeing the top 1%. Mathematically, that’s impossible.

Instead, tilt the odds in your favour by indexing across credible opportunities. It’s not glamorous, but it works. More companies. Smaller cheques. Repeated consistently. This is how you build a portfolio that is statistically likely to hold a generational company, the kind of company that delivers a 100x return and makes up for every other loss many times over.

So, if you’re starting your venture journey, don’t try to be a hero. Be methodical. Be consistent. Be humble. Trust the math. And remember: success in VC isn’t about being right once, it’s about staying in the game long enough to let one of your bets be right enough to change everything.

What we’ve been working on at Shuttle

• We just closed our fourth investment in Lemon 🍋

• We featured on the Money Never Sleeps podcast (coming this Friday) 🎥

• We’ve collated all your questions for our Webinar hosted by Ian Madigan next week 🎤

• We’re building some really cool AI features that enable customers to query their portfolio, investment opportunities, and more, directly from WhatsApp 🤖

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z tech professionals and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders