Union Square Ventures: The Thinkers

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The New York-based venture firm has one of the industry’s most remarkable track records. Its success comes from deep thinking and unusual discipline.

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If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Union Square Ventures (USV).

Masters of consistency. USV may be the most consistent venture capital firm of the past two decades. All of the firm’s vintages are reportedly performing in the top quartile, with several doing much better.
Thesis-driven thinkers. Founders Brad Burnham and Fred Wilson are exceptional systems thinkers. USV’s partners have used this ability to form theses that guide their investment practice.
Disciplined deployers. Given its performance, USV has no shortage of suitors. Despite what must be rabid LP interest, the firm has kept fund sizes conservative. This approach differs from prevailing market trends.
Building networks. For a venture firm obsessed with networks, it is fitting that USV has created its own. The firm offers a private community and a series of events for portfolio companies and their founders.

Lefty Gomez once said he’d “rather be lucky than good.” Many venture capitalists might make the same trade-off as the eccentric Yankees pitcher. In the grand-slam business of startup investing, a big hit can make up for a slew of strikeouts. Participating in early rounds for Google, Facebook, Stripe, or Coinbase erases a season of shanks, whiffs, and bunts. Since picking a generational business from a sea of pitches is no simple thing, it’s tempting to leave selection in the lap of the gods. Why not just shut your eyes and swing?

Some do. So many, in fact, that this “hope as a strategy” has a name: spray and pray. In small bursts, spraying and praying can work well. Anyone lucky enough to have splashed some capital on the names mentioned above may have looked, for a time, like a guru. Never mind the litany of failures; in venture capital, it is your successes for which you’re remembered.

This dynamic can make it difficult to distinguish between practitioners. If it takes just one hit to do so well, how do you know which investor is lucky and which is good? How do you distinguish the gleeful chancer from the skilled technician?

The only certain solution is to wait. Either an investor keeps hitting, or their luck runs out. Over a long enough time horizon, finesse and good fortune diverge.

Union Square Ventures may be the most reliable slugger in startup investing. Since it opened its doors in 2003, few other funds have maintained such elevated performance for so long. USV has consistently performed in the top quartile across its vehicles. It has also logged some of the top-performing vintages of all time. Much of this success stems from the firm’s gift for thinking deeply about the future and devising a thesis that distills an investment opportunity. It is the venture capital equivalent of pointing toward center field before the pitch comes in, calling one’s shot.

Like every successful investor, USV has been lucky. But more importantly, it has been very, very good. Today’s piece will explore the firm’s history, evolution, and playbook. Read on to learn about:

Flatiron Partners. Before starting USV, Fred Wilson co-founded Flatiron Partners with Jerry Colonna. The firm invested in buzzy startups like Geocities and The Industry Standard. Much of its portfolio collapsed during the dot-com crash.
A difficult raise. Despite their pedigree, Wilson and Brad Burnham took the better part of eighteen months to raise USV’s first fund. The University of Texas played a pivotal role in catalyzing institutional interest.
Two vintages. USV’s first fund was an extraordinary hit, returning ~14x of invested capital. The firm’s 2012 vintage has done even better.
The sleeper hit. USV is well-known for investments in Twitter, Zynga, Coinbase, Tumblr, and Etsy. One under-the-radar smash was recruiting platform Indeed.
Staying disciplined. Despite its success, USV has kept its funds small. Its latest early-stage vehicle is $275 million, a modest sum for a franchise of its stature. This discipline has helped USV maximize returns.

Let’s jump in.

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Origins

Union Square Ventures is the product of two tenured private market investors, Fred Wilson and Brad Burnham. Their journey to starting a fund involved big wins, burst bubbles, legendary entrepreneurs, and shuttered firms. It is also the New York venture market’s coming-of-age tale.

Meet cute

In 1996, Fred Wilson got his chance. After spending nine years rising through the ranks at Euclid Partners, the thirty-five-year-old financier was about to helm a firm of his own.

That opportunity had come about in surprising circumstances. During his time at Euclid, Wilson had bet $250,000 on a “washed up” former banker with a plan to “push” information from the internet to a consumer’s desktop machine. Instead of visiting a webpage to see the latest news, it arrived, unbidden. Headlines appeared on your home screen, not unlike a TV station’s ticker. The entrepreneur behind the invention was Mark Pincus, and his business was called Freeloader. Sunil Paul, a former AOL product manager, served as a co-founder.

A few months after Wilson’s initial investment, Euclid Partners upped their stake, deploying a further $1 million. Softbank Ventures joined the round, with Charles Lax leading a $1.6 million investment. Both firms turned a quick profit, though perhaps not one as ample as it first looked. Eight months after Freeloader’s founding, it sold to Individual Inc. for a mix of cash and stock, valued at $38 million. That price initially implied a more than 5x return for Softbank and even more for Euclid, though a steep decline in Individual Inc.’s stock price abbreviated the reward.

Wilson had impressed Softbank’s team. Once the Freeloader deal closed, Lax proposed he join the firm’s partnership. Though Softbank ran a very different strategy in those days, there is some irony in the idea that one of venture capital’s most disciplined investors might have ended up at a firm now renowned for its immoderacy.

Wilson felt it was time for a new chapter, but he wasn’t sure whether Softbank represented the right next step. As he considered that option, another emerged.

Wilson had met Jerry Colonna a few months earlier through the Freeloader deal. Colonna’s employer, CMG@Ventures (@Ventures), was considering investing. When Wilson arrived at Colonna’s office, he was surprised to find his counterpart sporting a ratty Yankee T-Shirt and tattered jeans. “Ok, this is an internet guy,” Wilson reportedly thought. Despite their outward differences, the two developed a good rapport.

Colonna seemed to inspire such affinity from almost everyone he encountered. Though @Ventures declined to invest in Freeloader, Pincus treated Colonna as a confidant and advisor. As a result, when Pincus learned that Wilson was considering a new position, he felt compelled to page Colonna and share the news. Pincus assumed his first believer and close advocate would make an exceptional team.

As it turned out, Colonna didn’t even need another meeting to be convinced. When Wilson canceled their breakfast after remembering it was his daughter’s kindergarten graduation, Colonna realized the outgoing Euclid partner shared his values. When they finally did meet, Wilson concurred.

Rather than rejecting Softbank outright, Wilson countered. What if Softbank invested in his and Colonna’s newest fund instead of hiring him? Flatiron Partners would focus on the burgeoning New York City tech ecosystem, giving Softbank an informal presence in a potentially important new market.

Softbank was persuaded. The firm joined as Flatiron’s first LP and was quickly followed by Chase Bank. Fred Wilson had gotten the shot to run a firm of his own.

Flatiron Partners

Wilson and Colonna’s new endeavor coincided with the inflation of the dot-com bubble. As tech grew in the public consciousness, Flatiron attracted attention. New York magazine dubbed the firm’s partners “The Princes of New York” in one much-discussed profile.

Flatiron’s early performance justified that moniker. Indeed, the firm’s partners proved a strong pairing, with Wilson’s high-energy and analytical abilities marrying well with Colonna’s formidable charisma. “He was the person that entrepreneurs always connected to,” Wilson said, “Bring Jerry in a meeting, and they’d fall in love with us.” Those abilities led to Flatiron selecting several early internet winners, including Geocities, Mercado Libre, The Industry Standard, Kozmo.com, TheStreet.com, and Yoyodyne, run by a green entrepreneur named Seth Godin.

Geocities, in particular, looked like a landmark win. Flatiron led the web directory’s $8 million Series B round in 1996, following on in the Series C the year after. The first of those two investments was assisted by a young Brooklynite, Jason Calacanis, to whom Colonna had taken a shine. Calacanis drafted the company's memo, helping convince Softbank and Chase to invest alongside Flatiron.

In 1999, Yahoo acquired Geocities for $3.7 billion in an all-stock deal. It looked like an outstanding outcome, set to return Flatiron’s fund, perhaps many times over. In reality, Flatiron never realized gains of that size on the Geocities sale.

In 2000, the dot-com bubble burst, bringing tech to its knees and crippling Flatiron’s portfolio. Once-buzzy companies like The Industry Standard and Kozmo.com were bankrupted. Yahoo, which had traded at a high of $118.75 a share in January of 2000, fell to $9 by September the following year, pummeled by post-9/11 instability. By then, Flatiron had closed its doors, with JP Morgan Chase absorbing the entity.

“We made a fortune and we lost it in the blink of an eye,” Wilson later said. Flatiron’s princes had discovered that roiling markets were capable of dethroning anyone.

Brad and Fred

In the aftermath of Flatiron’s closure, Colonna left venture capital and embarked on a path that would culminate in his reinvention as a founder coach. Today, he is one of the most sought-after advisors in the tech world. His business, Reboot, has established itself as an authority in leadership development.

While Colonna discovered his calling lay beyond venture capital, Wilson’s legacy was built by persevering. He spent two years after the fall of Flatiron “licking his wounds and internalizing the lessons” he’d learned. Though without a fund to manage, Wilson retained a pulse on the battered venture scene by angel investing. One such opportunity reconnected him to an old connection: Brad Burnham.

Wilson had met Burnham years earlier as part of an investment in financial information business, Multex. While at Euclid Partners, Wilson attended a talk by Isaak Karaev at ADP. Karaev had joined the payroll behemoth after it had purchased his startup, taking on something close to an Entrepreneur-in-Residence role. Over the course of Karaev’s presentation, it became clear he was working on something new. Wilson approached Karaev about funding his next venture and soon became one of Multex’s first investors. AT&T Ventures joined Euclid on the cap table, with Burnham serving as the telecom firm’s representative.

By that point, Burnham had worked at AT&T for fourteen years, save for a brief hiatus. In 1989, Burnham had spun a startup out of AT&T called Echo Logic. The company translated software so that applications could be used across different computers. Though AT&T was Echo Logic’s only investor and primary shareholder, Burnham ensured he and his team had minority rights. The process of granting those protections was so arduous for AT&T CFO Bob Kavner that he created a separate venture fund to manage future incubations and invest in outside businesses. After Echo Logic ceased independent operations in 1993, Burnham joined AT&T Ventures, advancing to the role of General Partner. The firm repaid the sovereignty gifted by its parent with outstanding performance: from inauguration to 1999, AT&T Ventures turned $350 million in primary capital into $1.2 billion. (Like Flatiron Partners, the firm suffered a brutal reverse in the dot-com crash.)

Flickr and Startup Iceland

Multex’s lively board meetings gave Wilson and Burnham a chance to get to know one another and trade thoughts on the future of the internet. Those conversations would convince Karaev and the team to transform Multex into a primarily web-based business. In March 1999, Multex hit the public markets at a $295 million valuation. The company navigated the crash and eventually sold to Reuters for $185 million in enterprise value.

Though Multex might have acquainted Wilson and Burnham, it was Tacoda that prompted a partnership. After departing AT&T Ventures, Burnham helped entrepreneur Dave Morgan with his newest endeavor. The two had met a few years earlier when Morgan delivered a literal elevator pitch in a Dallas hotel. “In fourteen floors, I got enough of his interest to talk to him more in the lobby,” Morgan said. After that startup, Real Media, merged with PubliGroupe, Morgan sought a second act. He returned to the online advertising space and, with Burnham’s counsel, founded Tacoda.

Morgan’s only problem was the small matter of capital. Like Flatiron, many venture firms had buckled during the crash. Those that had survived were conserving money, knowing that LP funding was in short supply. “No venture firm was going to invest in adtech in 2001,” Morgan said.

Without institutional capital, Morgan and Burnham tapped New York City’s angels, including Fred Wilson. Enamored with Morgan’s pitch, Wilson rounded up a consortium of venture capitalists willing to invest their own money. Venture legend Howard Morgan invested, alongside old friend Jerry Colonna, Nancy Peretsman of Allen & Company, and Jerry Rosenkranz, a prominent angel investor.

Wilson and Burnham grew closer during the investment process and stayed in touch in the following months. The French Roast often served as the location for long discussions on the flaws and future of the venture capital industry. By early 2003, both men surreptitiously asked Dave Morgan for his opinion on a potential partnership.

“It was kind of like high school dating,” Morgan said, “Each of them wanted to talk alone about the other.” To Morgan, it was an obvious fit. “I told them, ‘you guys will crush it.’”

Morgan’s endorsement did the trick. Wilson and Burnham decided to start a new partnership, named after the neighborhood where they set up shop. In October 2003, Union Square Ventures was born.

Union Square Ventures

Despite Burnham and Wilson’s pedigree, raising their new fund was no easy feat. It took the better part of eighteen months to secure the $125 million for “Union Square Ventures 2004.” Attracting the first $20 million was particularly hard, according to one source familiar with those early days. “There was no money anywhere,” Dave Morgan said of the period.

Winning over the University of Texas Investment Management Company (UTIMCO) proved a turning point. Senior Investment Officer Lindel Eakman committed to the fund and catalyzed a slew of interest. In the end, roughly two dozen institutions joined USV’s first fund, according to a source. All will be thanking their lucky stars today.

Fittingly, one of USV’s first investments was into Dave Morgan and Tacoda. A few years later, the company would sell to AOL for $275 million, delivering a massive windfall to the firm. Though they couldn’t have known it then, Burnham and Wilson had nearly returned the fund with USV’s first check.

A familiar face ran another early portfolio company. After shepherding Multex to an acquisition in 2003, Isaak Karaev started another business, Instant Information. That company would also be acquired, absorbed by EPAM in 2010.

It didn’t take long for USV to find investments that eclipsed these early successes.

Performance

There is no such thing as a safe bet in venture capital – but USV comes closest. Since its debut, perhaps no other fund has delivered high performance as consistently. Not only have Wilson and Burnham maintained a superb batting average across vintages, they’ve also hit some true grand slams.

Consistency

A tenured institutional investor in venture capital funds shared their thoughts on USV. Though their firm had not backed Wilson and Burnham’s shop, they were full of admiration. “For my taste it’s the perfect VC,” they said.

That appraisal was inspired by USV’s reliability, above all else. “The consistency is the most difficult thing,” the senior investor said, “Every single fund is way above the average.” According to this individual, all of USV’s funds have returned at least 5x. Some have delivered “substantially more than that.” No other fund – except perhaps Sequoia – has achieved such reliably exceptional returns to the investor’s knowledge. The Information previously reported that USV’s 2004, 2012, 2014, and 2016 vintages comfortably placed in the top quartile. In total, USV has raised eight early-stage funds and four opportunity vehicles for later-stage investing. (Presumably, fivefold returns are reserved for vintages with some time to mature.)

Though USV’s work is most impressive when viewed in its totality, two vintages have proven particularly remarkable.

Vintage 2004

USV’s first-ever fund turned out to be one of the greatest in venture history. The firm’s 2004 vintage was reported to have returned ~14x on total invested capital as of 2018. Such outperformance was driven by a portfolio that included Zynga, Twitter, Tumblr, Indeed, and Etsy.

Zynga was USV’s first “high impact exit,” according to Fred Wilson. Founded by Mark Pincus, the man that had once brought Wilson and Colonna together, the social gaming company was a breakout success. Former USV analyst and current Spero Ventures GP Andrew Parker remarked, “I don’t think anyone had seen a company grow revenue so quickly. It was truly breathtaking.” Zynga went public at a $7 billion valuation, delivering a 65x return for USV.

Twitter remains the best-known investment of the bunch. According to Burnham, there was little competition for the deal. In part, that was due to the eccentricity of Twitter’s founders. Jack Dorsey, Ev Williams, Noah Glass, and Biz Stone were not traditional hard-charging entrepreneurs. “You would never have said that Twitter was a great team,” one source noted. USV’s willingness to invest revealed something profound about the firm’s approach: ideas mattered more than founders. Burnham and Wilson were willing to overlook potential character flaws or rough edges if a concept was compelling enough. Several sources pointed to the founders of Tumblr and Etsy as other examples. “[These were] not people that New York VCs would typically back,” one investor noted.

The market’s reticence was to USV’s advantage. The fund led a $5 million Series A, securing a roughly 33% stake in the process. Twitter later IPO’d at a $14.2 billion valuation.

If Twitter is the vintage’s most famous investment, Indeed is the most underappreciated. Burnham reportedly knew founders Rony Kahan and Paul Forster before starting USV and made it one of the firm’s first investments. Like Twitter, the job search platform represented an obvious example of a business with network effects – a focus for USV during this era. Indeed raised a single round of $5 million before its acquisition for $1 billion.

Etsy was a notable case because of its return profile and provenance. The investment was sourced by Albert Wenger, an operator who would become a vital part of the USV story. Wenger had known Burnham for several years when he joined USV portfolio company Delicious. The social bookmarking startup worked in the same building as its financial backer and needed a seasoned executive to help steer a green founding team. “Albert was the adult minding the shop,” one source said of Wenger’s time at Delicious.

After Delicious sold to Yahoo, Wenger joined USV as a venture partner while pursuing other projects. Wenger ended up sourcing two deals in the first fund: Clickable, which didn’t yield a return, and Etsy. The latter went public in 2015 at a $3.5 billion valuation.

Wenger became a general partner in 2008. Wenger was trained as a computer scientist and added a different perspective to Wilson and Burnham. He was the partner that first identified the opportunity in developer tooling and productivity. “As an engineer, he could pick up [a product] and code with it,” one source said, “he had an edge on that stuff.” Later investments in MongoDB and Twilio represent the output of that advantage. As one source said of the MongoDB financing, “That’s the kind of deal Fred and Brad would never have done without Albert there.” Today, Wenger is the de-facto head of USV, though Burnham and Wilson remain active.

Vintage 2012

USV outgunned its inaugural vehicle eight years later. According to the institutional investor I spoke with, the firm’s 2012 offering is its best. That is in large part thanks to its stake in Coinbase.

USV was early to recognize the disruptive potential of the blockchain. Dave Morgan recalled the firm talking about its importance long before the rest of the market. “They were telling us in 2010 that crypto was the future,” he said. The firm used a portfolio meeting around that time to explain crypto to its founders, using pieces of paper with numbers written on them to demonstrate how bitcoin mining worked.

Crypto represented a natural evolution of USV’s interest in networked businesses. The firm approached the revolution as another phase of technological adoption. “They always saw crypto as a next generation internet operating system play,” Dave Morgan said, “Not an asset appreciation play.”

Coinbase represented a tidy encapsulation of that interest. USV led the exchange’s $5 million Series A and followed on in subsequent rounds. Traditionally, the firm has done an exceptional job growing or protecting its stake in winners, often owning 15 - 20% at the time of exit. Even after selling 28% of its Coinbase holdings, USV reached the DPO with a 7.3% share. After the first day of trading, USV’s stake was reportedly worth $4.6 billion.

It’s worth noting that by the time of USV’s first Coinbase investment, the partnership had added several other talents, including John Buttrick and Andy Weissman. Buttrick brought legal expertise from his time at Davis Polk & Wardwell, while Weissman added significant early-stage experience from building Betaworks, and personal charisma. One source described Weissman as a “startup whisperer” whose arrival represented a “culture shift.” “He adds a lot of extroversion to the group,” Andrew Parker remarked.

Nick Grossman also joined the firm during this period, becoming a partner in 2019. His expertise in policy and crypto has become a vital strength. The firm’s other partners are Rebecca Kaden and Samson Mesele. Kaden was recruited from Maveron in 2018 and has focused on education. She also authored USV’s third thesis. Samson Mesele was added as a partner in 2021 and serves as General Counsel.

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Playbook

How do you produce the kind of performance USV has managed? Though no summation can capture the operations of a firm nearing its third decade, certain characteristics seem especially important to USV’s approach.

Devise a thesis

Venture capital can be roughly divided between thesis-driven and opportunistic investors. USV is perhaps the most prominent example of a firm that develops an explicit point-of-view about the market and invests on its merit. To date, USV has crafted three successive theses, as follows:

Thesis 1.0. Large networks of engaged users, differentiated through user experience, and defensible through network effects.
Thesis 2.0. As the market matures, we look for less obvious network effects, infrastructure for the new economy, and enablers of open decentralized data.
Thesis 3.0. Enabling trusted brands that broaden access to knowledge, capital, and well-being by leveraging networks, platforms, and protocols.

USV

The first of these has achieved near-legendary status. With the benefit of hindsight, USV’s read on the market in the mid-to-late 2000s was astute and led to investments like Twitter, Zynga, Tumblr, and Etsy.

Thesis 1.0 is particularly reflective of Burnham’s ideas. Several sources noted Burnham’s exceptional systems-level thinking, with one describing him as “the architect” of this framework. Another referred to him as “deeply smart,” with a gift for “figuring out where the world is going.”

Wilson compliments Burnham’s abilities with his own intelligence, financial savvy, and knack for distilling complex subjects in accessible language. According to one source, the final of those qualities is a vital part of their partnership’s power. Burnham devises an overarching theorem that is sharpened and articulated by Wilson. Though oversimplified for my benefit, this depiction captures a core dynamic within USV.

Acting based on a thesis changes the entire configuration of a venture fund. Sourcing is more targeted rather than scatter gunned. Evaluation draws from a firm framework rather than a changing rubric. And advice is based on working with structurally similar businesses rather than a salmagundi of models. Crucially, because so much relies on the thesis itself, a fund may also be able to take greater risks on founder profiles, as USV has.

None of this works, of course, if one’s read on the market is offbase. USV’s theses clearly did, helping the fund identify megatrends like the rise of social media and the emergence of crypto.

Share your thinking

For a fund with its track record, USV prefers to stay out of the limelight, directing attention towards its portfolio. One commentator highlighted the firm’s stance in the lead-up to the Coinbase DPO as an example of its reserve. While other investors fell over themselves in an attempt to take credit, USV stayed quiet. “Fred didn’t say boo,” the source said, “The firm said nothing. It was just silent. Because the data speaks for itself.”

Though USV shows unusual restraint when it comes to self-congratulations, that doesn’t mean it stays silent. Indeed, the firm has an established writing culture that stems from Wilson. He began his blog, AVC, around the same time he started USV and has published nearly every day since then. Other firm members may not match Wilson’s cadence but also take writing seriously.

USV seems to use this practice to test new ideas and hone its thinking. Wilson’s blog, in particular, has helped build rapport with entrepreneurs. Andrew Parker said of Wilson that founders “felt like they knew him before they’d ever met him.”

Be a true partner

From a founder’s perspective, USV seems to fall in venture capital’s Goldilocks Zone. The firm is neither too hands-on nor conspicuously absent. “They understand they’re investors and not operators,” one founder remarked, “most investors don’t understand that.” The firm is there to provide forthright, high-quality advice without interfering. It does so by staying close to founding teams to ensure it understands the state of affairs. Fredrik Haga, CEO of Dune, highlighted this strength:

[USV] build very tight relationships. They've stayed small in fund size and team. They understand quite deeply who we are as founders, as a company, community, and so forth. Others have more services to offer, but USV has a lot of context…Advice can often be quite generic and not that useful unless you have good context and understanding.

Haga added that USV’s team was also “very human and have a lot of empathy.”

USV does get its hands dirty when necessary. Albert Wenger was influential in helping Twitter solve its “fail whale” problem and rightsize its engineering team. A New York Times piece from 2008 depicts Wilson crossing potential features off of Etsy’s roadmap. But the fund shows an understanding of where its role begins and ends.

USV also seems to go out of its way to help founders during dark moments. “They do things other funds don’t do,” Dave Morgan said. That includes financing companies to close their doors the right way, helping employees out as much as possible. Pragmatically, such acts of service are repaid in the iterated game of venture capital – founders that shutter their companies often return with a vengeance. USV has funded many entrepreneurs several times over, including Morgan himself.

The final notable way USV partners with startups is through its broader community. It is fitting that a firm so obsessed with network effects has built one of its own. Employees of portfolio companies are granted access to a Slack group that seems to serve a similar purpose as Y Combinator’s Bookface. It is a place to exchange thoughts and receive advice from fellow operators. USV also offers a “Manager Bootcamp,” “Women’s Executive Leadership Program,” and “CEO Summit.”

Manage the timing

USV is a master of timing. The firm has shown a deft ability to pick the right moment for its investments and exits. “Timing isn’t something people are typically good at,” Charlie O’Donnell said, “It’s very rare.” O’Donnell was USV’s first analyst before founding his firm, Brooklyn Bridge Ventures. As mentioned, USV nailed the timing of social media and crypto, finding monster winners in both markets. (USV also actively invested in leading crypto funds, including Multicoin Capital. Given Multicoin’s returns, that represents another significant win.)

Just as critically, USV seems to have effectively exited many of its biggest positions. The fund sold its Tumblr stake as part of the $1 billion acquisition, long before its value declined to just $3 million. A less pronounced version of this tale played out with Zynga, with USV reportedly selling its stake before the gaming business’s decline. It seems to have timed Coinbase equally well.

USV’s knack is more than just good fortune. The firm has a playbook for managing its winners. As Wilson wrote, “We typically seek to liquidate somewhere between 10% and 30% of our position in these pre-IPO liquidity transactions.” By doing so, the firm locks in gains, de-risks the investment, and allows for further appreciation.

Stay disciplined

In April, USV announced it had raised two new funds: a $275 million early-stage vehicle and a $350 million “Opportunity Fund.” These are modest figures for a firm of its stature and success, but they are consistent with USV’s extreme discipline around sizing. The firm has never raised funds larger than these newest incarnations, believing oversized funds can hamper returns.

USV’s approach in this regard runs counter to the industry trend. Many high-profile funds have used the last few years to expand AUM rapidly. “People don’t say no to money,” the institutional investor mentioned earlier said, “Especially when they’re successful.” USV is the exception. “They are a special fund in my mind,” the same source noted, “They’re one of the very few managers with the track record they have that have stayed disciplined on fund size.”

USV’s success shows that venture capital can be a game of skill. If you are willing to think and work and remain disciplined, even the seemingly flukish gambit of early-stage investing can become a kind of practice, a pattern.

Benjamin Graham once said that “successful investing professionals are disciplined and consistent and they think a great deal about what they do and how they do it.” If he were alive today, the man known as the Dean of Wall Street would not have to travel far to find those that agree with him.