Lessons After a Decade as a Retail VC Investor

I've been investing as a retail investor in SPVs for a decade and managing them as a GP for six years—over 600 investments wired. I see LPs learn the same lessons over and over. Here are a few things to help current and prospective LPs build better practices and expectations.

1) You are your own fund manager.

SPV managers offer curation and access, but LPs in SPVs ultimately decide how to deploy their own capital. You're building your own portfolio, creating your own strategy, managing your own capital, and riding the emotional swings of the market. Treat it that way.

That means applying the same discipline institutional VC managers use. Define your total allocation to venture (typically 5% or less of investable assets). Set a check size you can sustain over 3–5 years so you're not tapped out too quickly. Budget annual deployment rather than investing opportunistically—this prevents over-deploying in hot markets or into hot deals and going dark in down ones.

Spreading deployment across multiple years also protects you from a subtler risk: buying into a single valuation environment. If you put all your venture capital to work in 2021, you paid 2021 prices across the board. Pacing your deployment across vintage years isn't just a budgeting exercise—it's a risk management tool.

We previously put an article together diving deeper on this topic here. 

2) Look at a lot of deals before you invest in any.

When you're new to venture, every deal feels urgent and special—that's FOMO talking. The best cure is longevity and reps, and unfortunately losing a lot of money, but we're here to help you try to avoid that.

Review dozens of deals before you write your first check. You'll start to recognize patterns and the FOMO will subside, at least a bit. The more you see across cycles, the more grounded your judgment becomes.

One useful exercise: create a mock portfolio or start a portfolio with the absolute minimum check size (typically $1,000 in SPVs). Track the deals you would have invested in, note why you liked them, and revisit a year later to see how they're doing. This builds lessons without risking too much capital if any at all. By the time you're ready to deploy real money, you'll have a better sense of what "good" looks like—and you won't feel like you have to chase every deal that lands in your inbox with a tier-one investor attached.

3) Plan for a decade of illiquidity.

SPVs are completely illiquid. The right to sell typically lies with the GP, not you. If liquidity matters, make sure it's explicitly in the docs or negotiate a side letter before you wire. Otherwise, don't expect any early distributions or the ability to exit on your timeline.

Beyond the legal reality, there's the practical one: venture is a 7–12 year asset class. I have significant unrealized carry across my portfolio, but I've yet to see anything close to a home run actually distribute. That's normal for managers in their first 5–10 years. Patience isn't optional in this asset class.

Stress-test your personal financial plan against the assumption that none of this money comes back for a decade, and that some of it never comes back at all. If that scenario creates real financial strain, you're over-allocated.

4) Understand the service model you're buying into.

You're not investing in a fund with a 2/20 structure. You're probably not paying management fees on many vehicles. That means you shouldn't expect full-service support, detailed reporting, or hand-holding—the economics don't support it. If you're unsure what to expect, look at the team: if it's one or two people running the entire firm with no or minimal management fees, they don't have the resources to hire support staff. This isn't a complaint—it's a reality you should plan around. 

5) Expect your investment to go to zero.

This isn't pessimism—it's math. Even half of Founders Fund's investments return zero or near-zero capital. The same is true at Sequoia, Benchmark, and virtually every top-tier firm in the world. A majority of investments returning little or nothing isn't a failure of judgment—it's the architecture of the asset class. Build your portfolio assuming most bets won't pay off.

6) Don't assume any rights unless explicitly stated.

Pro-rata rights, information rights, etc. —none of these are guaranteed unless they're written into the documents. As an SPV LP, you typically get far less information flow than a direct fund LP or a board member. Quarterly updates may be sparse or you may never get them.

Calibrate your expectations accordingly: you're often buying access to a deal, not access to ongoing governance or information rights. Know what you're getting and what you're giving up relative to other ways of gaining venture exposure.

7) If you invest early, diversify aggressively.

The power law governs venture returns—a small number of winners drive all the gains. If you're writing $5K checks at the seed stage, the data suggests you should spread them across far more companies than you'd think (30–50+). One outlier can return your entire portfolio, and missing it is extremely costly.

Here's another way to think about it: if you deploy $50K total across 10 seed deals, the math says most of those go to zero. If your one winner would have been check number 11 and you stopped at 10, you missed the entire point of the strategy. There's a reason many seed funds target a minimum of 30 bets, and some aim for 100+.

We previously put together an article discussing the importance of diversification in early-stage venture [here].

8) Manage your emotions—deliberately.

You'll see markups that make you feel like a genius and markdowns that make you feel like an idiot—sometimes in the same quarter. None of it matters until there's cash in your account. This is cliche but the best opportunities I’ve made came when everyone else was running scared. And the worst mistakes tend to happen when the market is euphoric and every deal feels like a sure thing. 

9) The valuation markup is not your markup.

When a company raises at a higher valuation, your ownership has likely been diluted. As a rule of thumb, assume 20% dilution per funding round. It can be significantly more for companies that take on large amounts of capital (like Anthropic or OpenAI).

Always factor dilution into your expected gains. So when you see a 4x markup on paper, your actual return after dilution might be closer to 3x—and that's before carry and fees. Paper markups can be deeply misleading if you're not doing the math.

10) Don't be an asshole.

The fastest way to get removed from a syndicate is to be difficult without cause. I've had to remove LPs who pulled commitments at the last minute, threatened lawsuits because they didn't understand illiquidity, or blew up at me for canceling a deal. 99% of LPs are great, but 1% create a lot of noise—and when you have 10,000 retail investors, that adds up.

This goes both ways: if a GP is rude to you for no reason, don't invest with them. Generally just be kind. Typically everyone—both LPs and GPs—are good people doing their best. Don't forget that.

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✍️ Written by Zachary and Alex