In a sunlit Palo Alto office circa 1968, venture capitalist Arthur Rock typed out a one-page memo outlining the financing and governance for a little startup called Intel. The document was "brilliantly concise," covering the deal terms and board structure in a few paragraphs[1]. Fast forward to today, and the venture industry has sprouted thick term sheets and sprawling cap tables – yet the wisest investors find that the old virtues still win out. No matter the era, building enduring companies comes down to a handful of durable practices. In my journey through venture capital, I've seen fads come and go, from dot-com bubbles to crypto manias, but the fundamentals persist. This narrative explores those timeless lessons – in governance, in portfolio focus, and in sheer patience – that separate fair-weather investors from true partners.
Governance: Small Boards, Plain Terms
Early venture pioneers understood that lean governance makes for nimble companies. The first venture-backed startups kept their boards intimate – just the founders and one or two investors – enough to offer guidance but not so many seats that meetings turned into parliaments. (One mentor joked that if your board can't ride together in a mid-sized elevator, it's too big.) Modern research bears this out: a study reported in The Wall Street Journal found that companies with smaller boards delivered significantly higher 3-year returns than those with large boards[2][3]. Why? With a tight-knit board, directors engage more deeply and decisions happen faster. There's less posturing, more accountability, and nowhere to hide – every member pulls their weight. In my own experience, I once joined a startup board with eight members where meetings dragged on and nothing got done; after we restructured down to five, the team's focus snapped into place. The benefits of a small board include greater trust, candid dialogue, and a shared sense of purpose[4].
Simplicity extends to the deal terms themselves. The legendary Intel memo exemplifies how keeping terms plain and fair sets the tone for partnership. Thick bylaws and overly engineered term sheets can undermine trust before the ink is dry. By contrast, when terms fit in a paragraph, founders and investors start off on the same page (literally). I've learned to favor clear, founder-friendly terms – a single liquidation preference, basic anti-dilution, no convoluted control clauses – because a relationship built on alignment beats one built on legalese. In short, structure beats sentiment: if everyone knows the ground rules and incentives, you spend less time wrangling over fine print and more time building value.
Focus: Concentration Over Scatter
Venture investing is often described as a home-run game – a few big wins make the fund. That truth suggests an almost paradoxical strategy: do fewer things, but do them better. Many of the enduring venture funds, from the 1970s to today, chose concentration over spraying money at every hot pitch. By taking larger stakes in a small number of companies, they forced themselves to truly know those businesses. As one vintage VC quipped, "I prefer 10 babies I can actually raise, rather than 100 I can only visit on holidays."
Modern portfolio data highlights this trade-off. Smaller portfolios (roughly 10–15 companies) let an investor be deeply involved in each startup, whereas very large portfolios (30+ bets or more) sacrifice that intimacy for breadth[5][6]. A conviction fund might help recruit a crucial engineer or spend hours refining a go-to-market plan with a founder – the kinds of hands-on support that "distributed small checks" simply can't provide at scale. Champ Suthipongchai, a venture capitalist, notes that a "spray-and-pray" approach of investing tiny sums in hundreds of startups rarely works unless you miraculously pick only winners. Otherwise, you end up stretched too thin to be useful to any of them[7]. I've witnessed this first-hand: early in my career, I was torn between making many small bets or a few focused ones. Opting for focus, I found I could sit in on product brainstorms, make customer intros, even help "catch a fall" when a team hit a crisis. That kind of involvement is only feasible when your portfolio isn't a mile wide and an inch deep.
Focus also means planning follow-on investments wisely. History has taught VCs to reserve capital for the winners, so a great company isn't left starving at the foot of a next round. A venture fund will often earmark 50–70% of its dollars for follow-ons[10] – essentially saving dry powder to double down on startups that prove themselves. This isn't just financial prudence; it's a signal of belief. If a lead investor declines to join their startup's next round, outsiders read it as a red flag. As one TechCrunch column put it, when new investors ask if you're participating and you say no (even for "portfolio allocation" reasons), "you're not sending a positive signal"[11][12]. I always advise founders to ask potential VCs about reserves. One CEO I worked with did exactly that and discovered a big-name fund actually had no follow-on budget – a dealbreaker for her in choosing a long-term partner. Indeed, allocating follow-on capital can be the difference between a bridge to the next milestone or watching a promising venture stall out due to lack of runway[13]. In practical terms, maintaining a reserve gives startups a lifeline and positions them for a stronger negotiation when raising the next round[13][14]. The takeaway: concentrate your bets and be prepared to back your winners. Venture history smiles on those who pour water on the flowers, not the weeds.
Patience Through Cycles
Every boom brings its own dialect – one year it's "Eyeballs and clicks," another it's "Web3 tokens" or "AI-first cloud." The cycles dress themselves in new language, but underneath, the fundamental questions remain stubbornly the same. What pain is this startup solving? Who really buys this product? How does it make money, and at what margin? Is there a path to repeatable sales? In euphoric times, investors can forget these basics. (During the late-2020/early-2021 craze, many companies raised giant rounds on the thinnest of metrics, riding stories of endless TAM and blitzscaling. As PitchBook and NVCA data confirm, countless startups in that era got oversubscribed funding with "limited financial metrics to back them"[15].) But when the tide goes out, reality returns with a vengeance. By 2025, the venture climate had flipped to favor diligence over FOMO: investors once again poured over unit economics, scrutinizing burn multiples and gross margins before cutting checks[16][17].
It's in the downturns that discipline pays off. I remember in the aftermath of a hype cycle, one of my portfolio founders quipped, "Revenue is trendy again!" We laughed, but it was true – suddenly the slides about cash flow and customer retention mattered more than the grand vision. This whipsaw happens every cycle. Bubbles encourage beautiful narratives; discipline demands that each narrative spend a night under cold numbers before it can meet the morning. The startups that survive the busts are invariably those that married a real problem to a sober, thrifty execution. Think of the early 2000s dot-com crash: companies built on fluff evaporated, while those with solid unit economics (the Amazons, the eBays) not only survived but came to dominate. No matter how exuberant the environment, a company that treats cash with respect and time with suspicion will outlast one that treats funding as free fuel. As an investor, I've learned to ask the boring questions even at the height of a boom – it's amazing how a simple query like "What's your gross margin on this product?" can separate the truly promising startups from the flash-in-the-pan imitators. The cycle will turn again, as it always does, and when it does, I want to be backing the teams that bunkered down on fundamentals while others chased fashion.
Conduct Over Capital
Perhaps the most enduring lesson of all isn't about term sheets or financial models, but character. Venture capital is a long game. The best investors stick around, through pivots and pitfalls, long after the initial wire transfer. As a founder, I learned to value partners, not just funders – and now on the other side of the table, I strive to be the kind of VC I once needed. Capital is a commodity; conduct is not. A venture dollar from one firm spends the same as a dollar from another, but the behavior that accompanies it can make or break your company.
So how can an entrepreneur spot a true partner? I tell founders to probe for the human stories behind the term sheet. Ask that VC about a time they helped repair a broken board – have they rolled up their sleeves in a governance crisis, or do they avoid conflict? Ask if they've ever advised a founder to take a smaller round when a hype-fueled market would have allowed a larger one – a wise investor knows overfunding can hurt more than help, and isn't afraid to forgo ego and fees for the company's long-term good. (In fact, prominent VCs like Bessemer's Ethan Kurzweil explicitly warn that taking too much easy money can make it harder to build a company that endures, often leading to waste and loss of focus[18][19].) And perhaps most telling: Have they backed a founder again after a failure? Great investors understand that a failed venture isn't a failed person. They look for grit and integrity in defeat. Silicon Valley lore is rife with examples of VCs backing an entrepreneur's next startup even when the prior one tanked – precisely because they "invest in people, not ideas," as early Apple investor Arthur Rock famously said[20]. I experienced this in my own career: I once invested in a second-time founder whose first company had flopped spectacularly. My colleagues were skeptical, but I had seen how honestly he dealt with that failure and how much he'd learned. His next company thrived, and we were richly rewarded – not just financially, but in the trust built between us.
In the end, venture history in practice is a story of consistency. Technologies evolve and markets shift, but integrity, focus, and patience never go out of style. Pick partners who will still take your call in Year 5 as eagerly as they did in Year 1. Favor the investor who cares as much about governance and partnership as about getting a deal done. The early luminaries of venture capital succeeded not through magic or prescience, but through discipline: governance that fits on a postcard, portfolios concentrated enough to build cathedrals, and the courage to stay the course through droughts as well as blooms. Those are the lessons that survive every cycle – the ones I aspire to carry forward, deal by deal, company by company.
Case notes
- Lean boards, better outcomes: Empirical studies show a negative correlation between board size and firm performance[2]. Many startups thrive with boards of just 3–5 members (often the CEO, lead investor, and an independent) to keep governance agile.
- Follow-on discipline: Top funds typically reserve a significant portion of their capital (50% or more) for follow-on investments[10], ensuring their best companies aren't left without support. An investor joining pro rata in later rounds sends a strong positive signal to the market[11].
- Concentration vs. diversification: While a classic VC fund might make 20–30 investments, some focus on a dozen high-conviction bets to allow deeper involvement[5]. In contrast, a spray-and-pray approach with hundreds of tiny bets rarely affords any strategic influence[7].
- Fundamentals over hype: After frothy periods (e.g. 2020–21), the market inevitably corrects and investors refocus on fundamentals – revenue, margins, unit economics[17]. Startups built on solid economics and prudent burn rates consistently outlast those fueled by buzzwords and easy money.
[1] Arthur Rock's Intel Memo - Point of View - Stanford Law School https://law.stanford.edu/stanford-lawyer/articles/arthur-rocks-intel-memo/ [2] [3] [4] Board size: Can smaller boards make a more significant impact? https://www.diligent.com/resources/blog/why-your-board-size-matters-how-a-smaller-board-can-be-more-effective [5] [6] [10] Portfolio Construction in VC: Strategies for Smarter Investing https://www.vcstack.io/blog/portfolio-construction-in-vc [7] [11] [12] [13] [14] 3 reasons to maintain a follow-on allocation | TechCrunch https://techcrunch.com/2023/08/04/3-reasons-to-maintain-a-follow-on-allocation/ [8] [9] [20] Guide to Venture Capital Portfolio Strategy | Toptal® https://www.toptal.com/management-consultants/venture-capital-consultants/venture-capital-portfolio-strategy [15] [16] [17] Navigating the 2025 Fundraising Landscape | Right Side Capital https://www.rightsidecapital.com/blog/navigating-the-2025-fundraising-landscape-strategic-insights-for-early-stage-startups [18] [19] Why you should be cautious about overfunding your startup https://ltse.com/insights/why-you-should-be-cautious-about-raising-money