When we tell allocators that each fund makes exactly ten investments, the most common response is a polite question about diversification. The implicit suggestion is that we should make twenty, or thirty, or forty — that we should spread our risk across a wider surface and let the math do the work.
We disagree, and we think it is worth being precise about why.
A portfolio is a statement
A venture portfolio is not a financial product; it is a statement about what its authors believe to be true. Forty checks is, in most cases, a statement that the firm cannot tell which ten of the forty are worth doing. We respect that as an honest disclosure. We also believe it is incompatible with the kind of partnership we want to offer.
Ten investments per fund forces a difficult question on every Monday morning: is this the best use of one of the ten slots we will have for the next four years? It is a question with no comfortable answer. It is also, we think, the only question worth asking.
What concentration buys
Concentration buys time. We can answer a founder's email the same day. We can read every code review, sit in on every offer, fly out for the difficult conversations. The ten companies in any given fund are not, for us, a portfolio. They are a cohort — a small, idiosyncratic group of people we have agreed to know well for the next decade.
Ten is not a magic number. It is simply the largest number of partnerships any of us believes we can hold in our heads with the level of fidelity the work requires. If we ever come to believe that number is twelve, we will say so. We do not expect to.