Most tech startups fail outright within a few years. Some muddle along without ever generating the returns their early investors expect. Only a few really break out, and still fewer reach the 10x to 100x returns sought by early and middle-stage investors.

None of those investors has a perfect track record, or even close to it, as we’ll see. However, some investors do seem better at picking winners than others. We’ll call them visionaries.

Often, tech visionaries have deep experience building tech businesses themselves. Think Bill Gates (Microsoft), Pierre Omidyar (eBay) or Sky Dayton (EarthLink and more). Here’s how they spot opportunities to pursue themselves or via targeted investments — and what you can learn from how they operate.

They Think Beyond the Current Business Cycle

Sky Dayton and fellow tech visionaries like Craft Ventures general partner David Sacks participated in a $25 million fundraising round for Swarm in 2019, cementing the startup’s status as a leading telecom disruptor.

“The mobile phone is just the first of countless devices to become Internet-connected,” Sacks said at the time. “The ability to connect any device easily and cheaply, anywhere in the world, without needing to be in range of a WiFi hotspot, is transformational.”

Dayton agreed, adding that Swarm reminded him of EarthLink in its early days. The company aimed to “stay super scrappy, serve customers and generate revenue quickly,” he said.

Sacks and Dayton’s shared intuition proved correct when Elon Musk’s SpaceX acquired Swarm barely two years later, in August 2021, in a deal CNBC hailed as “expand[ing] the team — and possibly the technological capabilities — of its growing Starlink internet service.”

They Don’t Always Chase the Next Big Thing

Tech investors, and especially venture capitalists, have a reputation for following the herd. This is true as far as it goes and really does create some distortions within the wider tech industry. 

Remember the NFT bubble? Plenty of serious people were all in on that, even if they’d rather forget it now.

Indeed, what separates great investors from merely good ones is a willingness to hold fire when others have guns blazing. Even, as legendary business-builder Warren Buffett said, to “be fearful when others are greedy.”

After all, the next big thing is often neither next nor big. Sometimes, it’s downright destructive.

They Default to Caution, But Aren’t Afraid to Take Big Swings

Successful tech investors (and entrepreneurs) are more cautious than most people understand. They have to be. Otherwise, given the industry’s high failure rate, they’d quickly run out of money and ding their reputations beyond repair.

That said, great investors are more than willing to take big swings when they have high conviction. They’ll double down even when an investment’s value appears in danger of going to zero, betting that the team will turn it around (or the concept will prove irresistible to the market).

Every once in a while, these swings pay off big time. For example, according to blogger Brandon Donnelly, the value of early Uber investor Garrett Camp’s stake in the ride-hailing company grew from $220,000 to nearly $1.1 billion following its IPO. That took about 12 years; not a bad ROI, to say the least. 

They Focus on What They Know

Successful investors are deeply curious about the world around them. At the same time, they tend to specialize in subjects they understand better than almost anyone else. So do the entrepreneurs they support. 

Specialized investors avoid the curse of being “a mile wide and an inch deep.” That is, they avoid trying to do too many things at once — or trying to be all things to all people — such that they end up doing nothing very well. 

Instead, they stick to what they know and use their expertise to see opportunities most others miss. They may create venture funds that work with specific types of startups, such as fintech, blockchain, or “greentech.”

They Seek Synergies With Other Domain Experts

Successful investors know their limits. That’s why they specialize. However, they don’t want their limits to become, well, limiting.

To avoid this fate, they sync up with other investors whose strengths lie elsewhere. These relationships become mutually beneficial and allow for greater diversification than one person or even one team can achieve on their own. Some of the most successful venture capital firms are made up of multiple teams staffed with incredibly talented experts in one area or another.

They Invest in Talent and Ideas

Good tech investors love to say that they invest in talent, not companies. This is definitely important, because a company is only as good as the people who work in it. However, it’s not the whole story.

Great tech investors take a more holistic approach. They invest in talented people, sure, but also in first-rate ideas. Unfortunately, these aren’t always found in the same place. Super-talented people can (and often do) have misguided ideas that don’t generate the sorts of returns that keep their investors happy. 

Likewise, world-changing ideas don’t execute themselves. They need exceptional leaders to do that. And, sometimes, they need unusually adept investors (and advisors) to put it all together. Companies like Sky Dayton’s Earthlink, Elon Musk’s SpaceX and Bill Gates’ Microsoft had all those ingredients.

A More Thoughtful Approach to Tech Leadership

Entrepreneurs and investors like Sky Dayton and David Sacks pick more winners than most for all the reasons discussed above, and more. 

Equally if not more important is their overall approach to investing. They tend to be thoughtful and holistic, rather than impulsive and erratic. They evaluate data, look for patterns, and build sensible models of the world (or at least the industries and niches they know best).

Maybe most important of all, they’re also not afraid to be wrong. They know they don’t have all the answers, and that’s OK. If and when they make a bet that doesn’t pay off, they learn from the experience, try again, and avoid getting hung up on what might have been.