Over the past two years, I’ve studied countless investors who’ve had outsize success. One firm I studied was Altos Ventures. It popped up on my radar when I read the S-1 for Roblox and learned the firm had an almost 25% ownership stake when the company IPOed at a $35.5 billion valuation (see my post here). Altos’s stake was worth over $8 billion at IPO, an enormous haul for a single firm. (The Altos ownership stake can be seen on page 172 of the S-1, here. The ownership is under the name of Altos partner Anthony P. Lee, who serves on the Roblox board.)

Today, an interview of Ho Nam, an Altos founding partner, was published. I’ve watched several Ho interviews; this one was deeply personal and highlighted his struggles while building Altos. Ho described how Altos struggled for over fifteen years. The firm raised four funds and hadn’t generated meaningful returns. The partners hadn’t made any money and weren’t seeing eye to eye.

Their struggles led Altos’s three partners to change their strategy. They originally played what Ho calls the VC lotto game. They’d find promising companies early and focus on preparing them to raise the next funding round from a brand-name VC firm at a higher valuation. That strategy imploded when the dot.com bubble burst. The Altos partners realized they were playing a game they weren’t suited to win. They changed their strategy to focus on helping founders build enduring cash flow–positive businesses that didn’t require excessive venture capital funding. They focused on helping the founders create value for customers in a capital-efficient manner, not on hyping them up to later-stage VC firms.

This strategy change worked in a major way for Ho and Altos. The firm has since had several early-stage companies that each has gone on to be worth over $1 billion; a few, over $10 billion. The firm still owns a stake in Roblox, although it’s been distributing shares to LPs since the IPO, likely for liquidity reasons. As of this writing, Roblox has a market cap (valuation) of almost $42 billion. Coupang is another company Altos invested in early, and that company is publicly traded with a market cap of over $40 billion as of this writing.

Here are a few of my takeaways from Ho’s interview:

• Everyone can’t play every game. Figure out what game you can play and win. Play that game, even if it’s not popular at the time. Winning fixes everything, and you’ll look like a genius in the end.
• Struggle is often a prerequisite to outsize success. The painful times force you to evaluate why things aren’t working, hopefully leading to changed behavior. The wisdom gained during struggle leads to better decision-making, which is required for outsize success.
• Companies exist to add value to customers. You add value to customers by solving their problems. Focus on solving the customer’s problem and capital to grow your company is less likely to be an issue.
• The best founders are capital efficient. Constraints force creativity, which leads to better solutions for customers. Raising too much money leads to loose spending, which leads to founders focusing on raising capital from investors, not solving their customers’ problems.
• Control matters a lot for founders. If you’re constantly raising rounds of capital, you're losing control, and your board could fire you.

I enjoyed this interview, which contains nuggets of wisdom for founders and investors to learn from. If you want to watch this section of the interview, you can find it here. You can watch the entire interview here.

Note: Roblox is probably one of Altos’s most capital-efficient portfolio companies. Ho shared on X (formerly Twitter) that Roblox raised only roughly $10 million in funding to get to cash flow positive. All other capital raised was for secondaries (to buy shares from other investors) or to put on the company’s balance sheet.