The Generalist - Timeless Lessons from Great Investors

Hey friends,

Many of The Generalist’s most popular pieces focus on the inner workings of venture funds. Briefings on Union Square Ventures, Y Combinator, Tiger Global, Coatue, and others have been among our most widely read and best received.

Because of that (and because I’m now embarking on the challenge of running Generalist Capital), it felt like an opportune time to return to these funds and extract the most valuable lessons I learned from studying them.

If you’d like to explore Coatue's preparation, USV’s genius, and Multicoin’s conviction, jump in now.

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TIMELESS LESSONS FROM GREAT INVESTORS

Actionable insights

If you only have a couple of minutes to spare, here are ten lessons from great venture capitalists that investors, operators, and founders should know.

1. Come prepared
2. Think from first principles
3. Value exceptional ideas
4. Treat investing as a product
5. Offer genuine empathy
6. Size relative to your conviction
7. Adapt to the opportunity
8. Develop a sense of timing
9. Search globally
10. Tell the hard truths

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There is no single way to be a great venture investor. Some firms succeed by moving quickly; others rely on intense deliberation. One fund may routinely back the hottest startups in the market, while another capitalizes the under-loved.

All of which is to say that one person’s “timeless wisdom” is unlikely to resonate universally. Indeed, part of the intrigue in studying venture’s great firms is discovering the different ways of competing. Funds like Union Square Ventures, Coatue Management, Multicoin Capital, DST Global, Y Combinator, and Tiger Global may chase the same company but often look like they are playing different sports. Studying them has been instrumental in framing my new fund, Generalist Capital.

In today’s piece, we’ll revisit these disparate franchises, distilling lessons that I have found valuable. At the very least, I hope they incite new thinking as you invest in or build great businesses of your own.

1. Come prepared (Coatue)

As the stoic philosopher Seneca is supposed to have said, “Luck is where opportunity meets preparation.” Crossover fund Coatue Management exemplifies this trait. As an outsider in Silicon Valley circles in the early 2010s, the Laffont brothers had to find other ways to demonstrate their bonafides.

One of their most effective weapons was running an outside-in diligence process, deeply researching a business before meeting with the founder. This approach helped Coatue access companies like Snap, Lyft, and countless others. While conducting a “reverse-pitch” may not always be suitable – especially in earlier rounds – arriving with as much context as possible demonstrates interest and an appreciation for the problem a startup is solving. It also helps push early conversations beyond the prosaic and toward more meaningful discussion.

2. Think from first principles (Multicoin)

Venture capital is often criticized for being driven by FOMO. Rather than thinking for themselves, skeptics argue that investors simply follow social signals, fighting to get into “hot” rounds for the sake of it. For some managers, the fact that Sequoia or Benchmark is leading an investment is proof enough – no more thinking is required.

Borrowing another firm’s conviction stops you from developing your own and perhaps finding a true outlier investment. Multicoin Capital is an excellent example of a fund that operates from first principles. Throughout its history, Multicoin has developed its own theses, including many that have run counter to accepted wisdom. When the crypto ecosystem was focused on Ethereum, Multicoin became convinced of the need for a high-speed alternative Layer 1. That thinking eventually led to its investment in Solana.

The best investments often look insane to the rest of the market. The only way to find them is to do your own assessment and think from first principles.

IN A MEME
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​​​​​​​​​​​​​For the pictorially inclined, here's the whole piece — all 1,900 words of it — in a single meme.

THE GENERALIST PODCAST

Since the start of the year, we’ve been quietly building out The Generalist’s podcast. If you want to catch up on our catalog as you go for a walk, drive to the office, or sweat through a workout, check it out via the link below. I’d be grateful if you’d consider adding it to your audio rotation :)
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​Check out The Generalist podcast on Spotify or Apple Podcasts.​

PUZZLER
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​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint.

In the pantheon of puzzling greats, Jim W’s name surely features. He was first to respond with the correct answer again last week, narrowly edging Prasanna D, Joshua K, Fangzhou, Areeb Z, Neil P, Peter F, Leffe S, Michelle Q, Ankit J, Attison B, and Jo E. All navigated the nautical riddle presented in our previous email.

The answer? An anchor. Other good responses included a fishing line, crab trap, life preserver, poker chips, umbrella, and parachute. Well done to all.

Wherever you are in the world, I’m wishing you a lovely rest of your day.
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Until next time,
Mario