Answering "Why are you different?" requires deep thinking that connects strategy to operations. Han Shin of iFly explains that true differentiation is a cohesive system—his fund's thesis-driven research, concentrated portfolio, and large check sizes are all interconnected, enabling the deep, hands-on support that defines his value proposition.

The most successful venture investors share two key traits: they originate investments from a first-principles or contrarian standpoint, and they possess the conviction to concentrate significant capital into their winning portfolio companies as they emerge.

The venture capital industry was transformed by two parallel forces post-financial crisis. Crossover funds brought a hedge fund-style intensity and speed, while founder-led firms like a16z brought an entrepreneurial metabolism. This dual injection of urgency permanently changed the pace and nature of venture investing.

VCs at the highest level don't just write checks; they fundamentally reset a founder's aspirations. By placing a startup in the lineage of giants like Google and Oracle, they shift the goal from building a big business to creating a generational company.

To compete without a track record, Lux Capital built tangible, non-clichéd value-adds out of necessity, including a public policy group to influence non-dilutive government grants for their portfolio companies.

Large, contrarian investments feel like career risk to partners in a traditional VC firm, leading to bureaucracy and diluted conviction. Founder-led firms with small, centralized decision-making teams can operate with more decisiveness, enabling them to make the bold, potentially firm-defining bets that consensus-driven partnerships would avoid.

Competing to be a founder's "first call" is a crowded, zero-sum game. A more effective strategy is to be the "second call"—the specialist a founder turns to for a specific, difficult problem after consulting their lead investor. This positioning is more scalable, collaborative, and allows for differentiated value-add.

To foster contrarian thinking and prevent groupthink, Lux Capital allows each investment partner one "silver bullet" per fund. This enables a partner with deep conviction to make an investment even without team consensus, mitigating the risk of missing a brilliant, non-obvious opportunity.

While limited partners in venture funds often claim to seek differentiated strategies, in reality, they prefer minor deviations from established models. They want the comfort of the familiar with a slight "alpha" twist, making it difficult for managers with genuinely unconventional approaches to raise institutional capital.