No, a portfolio strategy is not 'spray and pray'

A few days ago, I pinned a long-form article by Dan Gray for further discussion. The article was reposted on LinkedIn from Twitter. The post was about the difference between VCs that try to invest smartly and those who simply pursue large numbers of investments and 'spray and pray.'

It was fascinating because Dan was seemingly sharing something he thinks was breakthrough news, but that is, in practice, more like investment 101.

Although I don't have Twitter (X) since Musk's ownership, I'll put a link to the full tweet at the end of this article.

Why fascinating? Because it shows again the absolute lack of education on basic risk strategies in innovation and, among other things, startups. That I got used to in the corporate world when someone from marketing is overnight bombarded Chief Innovation Officer, but for VCs? Come on!

OK, let me pause and rewind.

Dan's main points were:

• Unicorn probability is low – about 0.5–2.5% per seed investment.
• VCs can’t reliably predict big winners – a real example: of predicted top-5 in a fund, none turned out to be the actual top performers.
• One unicorn usually defines a good fund return – about 85% of 3× net-return funds have at least one breakthrough winner.
• To hit one unicorn, you need ~50 shots – at ~2% hit rate, 50 investments gives ~64% chance of a unicorn.

I mean, so far, so good.

This is absolutely common knowledge, though. Notably, no VC can predict which startup will turn out to be a unicorn. The thirty-year empirical rule is that you need about 120 startups hand-picked to be the best in their domain to maybe have a unicorn-level success, and five or six that will reimburse the bills.

Dan goes on...

• But most seed funds stick to 25–30 deals – often due to signalling, emulation, and desire to “add value”.
• Signalling bias – small portfolios let GPs pitch themselves as star pickers; large portfolios signal uncertainty.
• Following elite brand playbooks – firms emulate big-name VCs with small portfolios despite lacking their brand, deal flow, or track record.
• Value-add bandwidth – it's easier to promise founder support across 20 companies than 50+.

Small funds lose on the short term and even more on the long term. As smart as you are, you can't pick individual winners. What you can pick is a portfolio that stacks the odds in your favor, and for that, yes, you need quantity. Any LP funding a small fund is just throwing money away.

In passing, this is why VCs in Paris, Berlin, or London don't make money: if you don't have the firepower, you can't play the game. It amounts to trying to play soccer with a team of only three players because you have picked the best ones. It. Doesn't. Work.

• Large portfolio outperforms on medians – modeling shows 100-deal fund beats 20-deal one on mean, median, and survival odds—and is more likely to return ≥2× or ≥3×.

No shit.

See. Above.

Beyond the sheer frustration of seeing this presented as a breakthrough insight, it's still interesting that there's a real 'science' behind all this. Science, in the sense that the results of going above 100+ investments to get one possible huge return is a reproducible result.

It's true for VC funds, just like corporate venture.

And in passing, it also means that sovereign funds (like the BPI in France) should stop trying to outsmart the market and instead design real portfolio strategies with proper optionality.

The full "thing":