Trying to win a competitive Series A against a firm like Sequoia is nearly impossible for a smaller fund. Top firms leverage an overwhelming arsenal of social proof, including board seats at the world's most valuable companies and references from iconic founders, creating an insurmountable competitive moat.

Successful concentration isn't just about doubling down on winners. It's equally about avoiding the dispersion of capital and attention. This means resisting the industry bias to automatically do a pro-rata investment in a company just because another VC offered a higher valuation.

Applying Conway's Law to venture, a firm's strategy is dictated by its fund size and team structure. A $7B fund must participate in mega-rounds to deploy capital effectively, while a smaller fund like Benchmark is structured to pursue astronomical money-on-money returns from earlier stages, making mega-deals strategically illogical.

To avoid confirmation bias and make disciplined capital allocation decisions, investors should treat every follow-on opportunity in a portfolio company as if it were a brand-new deal. This involves a full 're-underwriting' process, assessing the current state and future potential without prejudice from past involvement.

Seed-focused funds have a powerful, non-obvious advantage over multi-stage giants: incentive alignment. A seed fund's goal is to maximize the next round's valuation for the founder. A multi-stage firm, hoping to lead the next round themselves, is implicitly motivated to keep that valuation lower, creating a conflict of interest.

A smaller fund size enables investments in seemingly niche but potentially lucrative sectors, such as software for dental labs. A larger fund would have to pass on such a deal, not because the founder is weak, but because the potential exit isn't large enough to satisfy their fund return model.

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.

Series A is a brutal competition where top-tier firms have an insurmountable advantage. Their brand and network are so powerful that if a smaller fund wins a competitive Series A deal against them, it’s a strong negative signal that the top firms passed for a reason.

'Gifted TVPI' comes from consensus deals with pedigreed founders who easily raise follow-on capital. 'Earned TVPI' comes from non-consensus founders whose strong metrics eventually prove out the investment. A healthy early-stage portfolio requires a deliberate balance of both.