Venture capital has a dirty secret: the industry built on “high-risk” investing is actually run by people terrified of looking wrong rather than actually being wrong. Most VCs aren’t visionaries backing the future at all. They’re bureaucrats defending their reputations at the cost of real innovation.
“The venture industry’s dismal performance really isn’t because it takes too many exciting risks on world-changing innovations. Its failures lie in its refusal to think critically about its own blind spots,” explains Emily Dinu, founder of Numinous Capital. “What looks like bold investing is often herding behavior dressed up as critical thought, research, and data-backed conviction.”
This systemic failure reveals itself in the industry’s most toxic practice: VCs routinely prop up failing companies, orchestrating new funding rounds not because they believe in the business but because they need those paper valuations to raise their next fund. This means they’re padding their own pockets and preserving their reputations while burning LP capital in companies they privately know are doomed.
The consequences are stark. According to research from Harvard Business School, 75% of venture-backed startups never return capital. This is not because they were too ambitious but because they were poorly vetted investments made by overconfident investors who refused to question their own judgment.
“Venture capital has created a culture that rewards aggressive confidence over insight and curiosity, which truly defeats the purpose of VC,” Dinu says. “But the biggest wins in this industry have always come from betting on what looked insane at the time. You can’t do that if you’re more worried about looking smart than actually being right. Priorities matter.”
The evidence for this counterintuitive approach is hiding in plain sight. Peter Thiel’s Founders Fund made billions on SpaceX, while conventional wisdom declared private space companies an impossible investment. Sequoia nearly passed on Airbnb simply because it didn’t fit their mental model of what a startup should be. They invested only because one partner questioned the firm’s dismissal.
“The best traders don’t win by being right all the time,” Dinu points out, drawing from her experience working inside hedge funds. “They win by cutting losses quickly and doubling down on asymmetric upside. But most VCs are so invested in seeming infallible that they can’t embrace this mindset.”
Research from McKinsey confirms that investors who regularly challenge their own theses significantly outperform those who rely solely on instinct and past pattern recognition. What’s more, history’s largest exits weren’t obvious opportunities but rather were deals only a few investors had the intellectual honesty to back when everyone else dismissed them.
The problem persists because LPs themselves enable it. By continuing to fund firms based on inflated portfolio valuations rather than realized returns, limited partners are complicit in rewarding the very behavior destroying their capital. If LPs stopped writing checks to safe, consensus-driven firms, the entire incentive structure would transform overnight.
This insight forms the cornerstone of Numinous Capital’s investment philosophy. “We’re not in the business of passively looking for great deals. The magic happens when we actively search for blind spots everyone else is missing,” says Emily Dinu. “If an opportunity makes us uncomfortable, we’d never dismiss it. We’d, in fact, take interest and interrogate why we feel that discomfort.”
This translates to a radically different approach: cutting losses quickly while doubling down on asymmetric winners and funding what’s inevitable rather than what’s popular. The strategy recognizes that the most promising investments aren’t those everyone agrees on but rather the ones only a few truly understand before they take off.
“Venture capital isn’t supposed to be about ego, or really the venture capitalist at all. I believe that we’re here to identify and facilitate the best and most transformative opportunities of our lifetimes and lifetimes to come,” Dinu emphasizes. “The best investors are never certain, because that’s simply not how the pursuit of knowledge works. The best investors are relentless in searching for the truth, even when it contradicts their initial judgment.”
In an industry that rewards confidence over correctness, intellectual honesty is more than just Numinous Capital’s competitive advantage. It is the unfair edge that other firms won’t admit they’re missing. By the time they figure it out, the biggest opportunities will be long gone.
