The Case for Concentrated Portfolios in Volatile Markets

The conventional wisdom in venture is simple: spread your bets. The power law dictates that most investments will fail, a few will be mediocre, and one or two will return the fund. The logical response, many argue, is to maximize the number of shots you take. We've never found this logic convincing. Not because the power law is wrong, it isn't. But because the conclusion drawn from it misunderstands what actually drives outsized returns. The companies that return funds don't succeed because they were lucky enough to be included in a large portfolio. They succeed because someone believed in them deeply enough to help them get there. Concentration forces discipline. When you have thirty portfolio companies, you become a passive observer of most of them. When you have ten, you become a genuine partner. The difference in outcomes between those two modes is not marginal; it is structural. In volatile markets, this distinction becomes even more important. When conditions turn, the companies that survive are the ones with engaged investors who have both the incentive and the capacity to help. A founder who can call their lead investor on a Saturday and get a real conversation is in a fundamentally different position than one who sends quarterly updates into a void. We have never regretted a portfolio company we said no to in order to stay concentrated. We have sometimes regretted moving too slowly on the ones we said yes to. That asymmetry is why we invest the way we do.