Even with big wins, a venture portfolio can fail if not constructed properly. The relative size of your investments is often more critical than picking individual winners, as correctly sized successful investments must be large enough to overcome the inevitable losers in the portfolio.
Lara Banks of Mechanic Capital warns against the 'value trap' of investing in a cheaper, lower-quality company. Experience shows it's better to pay a premium for a top-tier company with a strong management team, as the perceived discount on a lesser competitor rarely compensates for its inherent weaknesses.
The most painful investment misses—the 'anti-portfolio'—can serve as the primary inspiration for a new venture firm's strategy. Nnamdi Okike of 645 Ventures used his experience passing on companies like Skype and Facebook to build a new firm specifically designed to identify and invest in similar opportunities.