Betting on Startups: What Poker Can Teach Us About Venture Capital
Lynx Collective is hosting a Founder & Investor Poker Night on March 26 w/ Lerer Hippeau, Rho and Goodwin - Request an invite here!
Maurice Russo, an investor at Lerer Hippeau, didn’t take the conventional path into VC. Before betting on startups, he was betting on hands at the poker table—playing full-time for two years. Surprisingly, he found that the strategies behind both worlds are strikingly similar - here are his insights.
In early-stage venture capital, much like in poker, success follows power law. When playing tournaments, even the best poker players expect to profit in only 20-25% of games. Their real winnings come from just a handful of tournaments where they hit big—mirroring how venture funds rely on a few breakout companies to drive returns. A fund might invest in dozens of startups, but in the end, it’s often just one or two that define the entire portfolio’s success.
Another parallel? Variance. Short-term results can be misleading. As Maurice puts it, “You and I can play poker for an hour, and there’s a good chance you’ll win. But over 100 hours? I like my chances.” The same logic applies in VC—one or two investments don’t define a fund. It’s about placing enough smart bets over time to let the winners emerge.
But variance doesn’t just impact individual results—it also shapes how investors and poker players manage risk. A poker player knows that even when they make the optimal decision, luck can still go against them in the short run. That’s why they don’t just play one hand or one tournament—they play thousands. Similarly, early-stage investors recognize that even great startups can fail due to unforeseen market shifts, bad timing, or execution risks. The best funds don’t put all their chips on a single bet; they spread risk across a well-diversified portfolio.
Then there’s the art of decision-making. Poker players and investors balance two approaches:
Game Theory Optimal (GTO): The mathematically correct, thesis-driven strategy—following a predefined system to maximize expected value.
Exploitative Play: A gut-driven, opportunistic style that adapts to talent, trends, and unpredictable circumstances.
VC firms, like poker players, tend to specialize in one approach or another. Some take a structured, thesis-driven path, building investment models around emerging sectors or macroeconomic trends. Others, like Lerer Hippeau, follow a more opportunistic, talent-first strategy—seeking out exceptional founders before they become household names.
But the real secret? Mastery of a chosen style. Whether in poker or venture capital, success isn’t just about picking a strategy—it’s about executing it at an elite level. The best poker players don’t second-guess their game; they refine it, sharpening their edge over time. Similarly, top investors double down on what works for them, sticking to a clear investment philosophy and perfecting their decision-making process.
In both games, there’s no single winning formula. The key is knowing your strengths, making enough smart bets, and staying in the game long enough for the odds to work in your favor.