Nov 6, 2017 · 32m · 20vc
20VC: Oren Zeev on Why Diversification Does Not Work, Thesis Based Investing Is Sceptical & Partners Mostly Stay Together For LPs
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In this episode of The 20 Minute VC, host Harry Stebbings interviews solo venture capitalist Oren Zeev of Zeev Ventures about his unconventional investment model, critique of traditional VC firm dynamics, portfolio concentration, and philosophy on founder support.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 23.3% of the talking time here. How this is scored →
Harry as informed peer 1.7 Guest teaching 3.6 Guest disagreement 2.1 Harry pushing back 0.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:30 Critique of thesis-based venture investing
Oren mockingly compares mainstream thesis-driven venture capitalists to eight-year-old kids playing soccer, all blindly chasing wherever the ball happens to be at the moment.
Hardest push from Harry ▶ 12:17 Refusing the cheerleader premiseHarry explicitly rejects Oren's cheerleader terminology, asking if being a permanent cheerleader prevents investors from offering necessary challenges to founders.
Biggest teaching moment ▶ 11:15 Exposing traditional VC partnership dysfunctionOren pulls back the curtain on traditional VC firms, educating the host on how internal politics and mutual dislike are hidden so partners can keep drawing LP money.
Harry holds his own ▶ 12:17 Interrogating board governance dynamicHarry shows strong subject understanding by pressing Oren on how to balance supportive investor cheerleading with the governance duty of challenging founder mistakes.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Oren Zeev's Background and Why Diversification Fails | 2 | 4 | 3 | 0 | Harry asks how early crash experiences shaped Oren's approach to diversification and burn rates. Oren contrarianly argues that diversification fails in tech investing because correlations spike in downturns, favoring high concentration instead. Harry agrees wholeheartedly with Oren's reasoning. | |
| The Non-Institutional Solo VC Model | 1 | 2 | 1 | 0 | Harry prompts Oren to clarify his non-institutional fund label. Oren explains his solo model with no offices or associates, delivering a personal relationship with the capital backing of a VC. | |
| Internal Dynamics and Dysfunction in Traditional VC Partnerships | 2 | 5 | 4 | 0 | Harry asks about the single biggest flaw in traditional VC structures. Oren provides a candid breakdown of partnership dysfunction, noting that partners often dislike each other and stay together merely for LPs. | |
| Founder Support, Board Member Evolution, and Humility | 4 | 5 | 2 | 5 | Harry directly challenges Oren's use of the term cheerleader, questioning whether unconditional support prevents investors from challenging founders. Oren accepts the critique, clarifying his stance on constructive brutal truth and sharing personal board mistakes. | |
| The Origin Story of Investing in Houzz | 1 | 2 | 0 | 0 | Harry asks a question submitted by David Sachs regarding the origin of Oren's Houzz investment. Oren recounts meeting the founders in their kitchen and writing a check within 24 hours after his wife spent three hours on the site. | |
| Quick Fire Round: Anti-Thesis Investing and Outsiders to the Pain | 1 | 4 | 4 | 0 | In the quick fire round, Oren dismisses thesis-based investing, comparing trend-chasing VCs to an eight-year-old soccer game. He introduces his core framework of backing founders who are outsiders to the industry but insiders to the pain. | |
| Backing Next Insurance and Disruption in Small Business Coverage | 1 | 3 | 1 | 0 | Harry asks about Oren's latest investment, Next Insurance. Oren explains why small business insurance is ripe for disruption because it is still conducted like it was a century ago through offline agents. |
Statements from this episode (15)
Zeev: Every VC investment he made in 1999 failed despite peak activity
“Scrap the almost everything I did in 1999 was crap. And by the way, I was more active in 1999 than any other year in terms of number of investments.”
Zeev: Inverse correlation exists between VC deal activity and investment quality
“So there's an inverse correlation I found between how active you are and how good you are.”
Zeev: Portfolio diversification fails in venture capital during market downturns
“In terms of diversification, if I learned anything, is that the diversification doesn't work, because when things turn south like that, then diversification is not going to save you, because everything goes down, and because everything is very correlated.”
Zeev: Spray-and-pray venture investing lowers standards and matches market indices
“When you over diversify, when you engage in what's called spray and pray, then number one, your threshold is much lower. Number two, it's much harder to make any impact on the investments. And number three, you are much less likely to do anything different fro…”
Zeev invested exclusively his personal capital for his first eight years
“Until in the first eight years from that I've been operating, I was really, I was investing my own money, period.”
Zeev: Zeev Ventures operates without offices, assistants, or partners
“For example, I have no physical offices. I have no I have no assistants. I have no associates. I have no partners.”
Zeev: Many VC partnerships hide severe internal dysfunction from LPs
“I think many, many partnerships are much more dysfunctional Then you would see from the outside, and there is a lot of, often, tensions between, you would think that partners need to be, you know, you would expect that partners are best friends, and really thi…”
Zeev: LPs prioritize stability and longevity above all else
“Because LPs, more than anything else, are suckers for longevity, and they like stability, right? LPs. LPs don't like changes.”
Zeev: Apax Partners kept unwanted partners due to LP concerns
“There were cases that That most of us really wanted to get rid of someone, and we didn't, because we were afraid of, and I'm talking about my Apex days, because we were afraid because we were concerned about the you know, the LP response.”
Zeev: VCs should write off investments if they know more than the founder
“If I know better than them, that's a horrible sign. I should just, I, you know, I should write the investment off if I think I know better than the founder.”
Oren Zeev: Houzz's only expense at investment was $1,500 AWS hosting
“And their only cost when I met them was 1500 dollar Hosting costs at, you know, for AWS, because they already had users, and already had, like, initial traction”
Oren Zeev: Agreed to invest $2 million in Houzz within 24 hours
“And I told them right there and then, how much money do you want? They said, two million. I'll give you two million. And we agreed on terms. It was very easy, and I put them in touch with the lawyer, because they, you know, they literally, you know, they didn'…”
Oren Zeev predicts Houzz will be his best deal ever
“I think house is going to be my best deal. I think it's going to be massive. I think it's going to be way bigger than people even appreciate today.”
Oren Zeev reveals he is Houzz's second-largest shareholder
“I happen to be the main early backer. I, even to this day, I'm the biggest shareholder other than Sequoia, who I brought to the table nine months after invested. So I'm the second, second larger investor to this day after they've raised, you know, after six hu…”
Zeev: Winning founders are industry outsiders, but insiders to the pain
“The deals that I like, deals that I was the most successful with are, and the founders that were able to really transform an industry, at least in my case, they were always outsiders to the industry, but they were insiders to the pain.”