Dragonfly Partner Haseeb: 13 Harsh Truths About Starting a VC That No One Will Tell You

Author: Haseeb, Managing Partner at Dragonfly

Translation: Peggy, BlockBeats

Editor’s Note: Amid the recurring cycle of “cryptocurrency is dead” declarations, author Haseeb Qureshi (Managing Partner at Dragonfly) reflects on his own experience, reviewing the process of building a crypto VC from scratch to scale, discussing fundraising, positioning, winning deals, post-investment support, and team building.

This article dissects the operational logic of VC from a practical perspective: in a structure where returns follow a power-law distribution, how to understand “non-consensus judgment,” how to view hit rate and heavy allocation strategies, why “winning deals” is more critical than “picking the right projects,” and why this is a business that requires long-term patience.

For those wanting to understand how VC operates, this is a straightforward and concrete sharing of experience.

Below is the original text:

I have a bad habit: whenever I accomplish something, I can’t help but write down how I did it.

We just completed fundraising for Dragonfly Fund IV, a $650 million crypto VC fund (and at the same time, nearly half the media once again declared “cryptocurrency is dead”). Currently, we manage about $4 billion in assets, with around 45 people across New York, San Francisco, and Singapore, making us one of the largest VC platforms in this “industry most people couldn’t survive.”

So when a few people asked me to write about how Dragonfly got to where it is today, I thought: well, why not.

Honestly, if back when I started Dragonfly someone had given me a blueprint on “how to build a VC from zero,” it would have been incredibly valuable. But the reality is—hardly anyone tells you these things.

Honestly, this article probably only helps 0.01% of readers, so spending so many words on it might seem pointless. But whatever. If you’re considering building a VC, or if you’re just like me 10 years ago—this article is for you.

When I first entered crypto VC, most people thought the industry was “dead.” That was 2018, right after the ICO bubble burst, and the entire industry was free-falling. Most of the people I started with had already left.

But I always believed crypto was something destined to exist long-term—it’s the kind of thing once you truly understand, you can never “pretend not to understand” again. So when people ask why I remain so optimistic about crypto, my answer is simple: if I didn’t believe in it, I would have left long ago. Now, it’s too late—this optimism has spread to the back of my mind.

Therefore, when Bo and I met and decided to build Dragonfly together, we didn’t expect the market to be enthusiastic. But every VC has to start from zero.

Lesson #0: Your first fund, you must put your life on the line

The lifeline of VC is only one thing: money.

To have a fund, you must first be able to raise money. If you lack the ability to access capital (or don’t have partners who can help you fundraise), then you’re not ready to run a fund.

For your first fund, you need to start by raising from friends. Your boss, your boss’s boss, anyone you know who is wealthy and reputable—even if only acquaintances.

If your reputation isn’t tied to this fund, it means you’re still taking risks. I’ve seen too many first-time fund managers imagine they can preserve their reputation even if the fund fails.

That’s a fantasy.

If you’re not all-in, success is nearly impossible. Yes, if you fail, you’ll be embarrassed and lose money from key people. But if you want any chance of success, you must leverage everything you have to make that first fund work. If you’re not willing to do that, you shouldn’t try to build a VC.

Once you get initial capital from those who have “every reason” to back you, then you move on to larger pools: family offices (ultra-rich families), fund-of-funds (funds that invest in other funds), “institutional capital” (university endowments, foundations, sovereign wealth funds).

Generally, from easiest to hardest, from low to high.

Now you start pitching your fund to these “money is no object” investors. But here’s the question: as a first-time fund manager, what right do you have to manage their money?

The only answer: you must have a clear, articulable advantage.

Lesson #1: Find a niche where you are stronger than anyone else, no matter how small

When we founded Dragonfly, the crypto VC space was still very small. But even then, a few dominant players already existed: Polychain, Pantera, a16z. To us, they were immovable giants.

So initially, we couldn’t lead any deals. No one wanted our money. We had to find a way to “crash the rounds.” Like startups, new funds must focus.

Our initial idea was: Bo in Asia, me in the US—we would do “East-West connections.” Crypto is global; we could be a bridge between Asia and the US, helping founders from both sides enter each other’s markets.

This positioning wasn’t enough to be lead investors. No founder would want “East-West fund” to be the lead. But it was strategic enough to get us a small seat at the table—and that was enough to start pushing in.

Lesson #2: Do the dirty work

It turned out that this East-West arbitrage was almost nobody else competing for. I was initially puzzled: such an obvious opportunity, why isn’t anyone doing it?

Later, I realized the answer: because it’s really damn hard.

This means running a fund across Asia and the US every day, with extremely high workload; more coordination, late-night Zoom calls, language barriers, and almost no normal life.

If success could be achieved without this, who would choose this path? But we had no choice. So we endured. We worked harder and were more jet-lagged than anyone else.

Many see VC as an elegant profession: summer vacations, quarterly ski trips. We did none of that. No money, no time, no breathing room. Our closest thing to “winter sports” was surviving crypto winters again and again.

Lesson #3: Optimize like a startup

Once you have a clear angle and can start participating in rounds, you must establish feedback loops. Investing is fundamentally a feedback loop—more tightly coupled, the better.

Investors demand startups to be highly data-driven and quantitative, but they often don’t do the same themselves.

You should record everything: your discussions, missed deals, use AI to record and analyze fundraising and investment committee meetings; review the biggest deals in the industry, understand why they succeeded, and distill theories; study successful investors and find common traits. Now with AI, this is much easier.

But most investors don’t care about this. They rely on “gut feeling.” Success depends more on luck and network strength.

Luck can help temporarily, but it’s not a strategy and doesn’t compound like cold, ruthless optimization.

Lesson #4: Talent is everything

VC management is generally terrible—organizational management, I mean. One-on-one communication, training systems, KPIs, responsibilities, transparency, all-hands meetings… many VC firms do these terribly.

I later realized why: VC doesn’t screen for management ability like a company does.

Poor management in a company leads to failure; but VC is a power-law industry—if a few people can generate outsized returns, the fund survives even with terrible management overall.

But long-term, good management is an advantage. It retains top talent and helps them grow into future core partners. VC is notoriously bad at “intergenerational transfer” and internal promotion; many partners even fear hiring smarter, younger people.

At Dragonfly, we attract and retain a group of people who could have gone to bigger, better platforms. We give them stability, voice, and independence—showing we value them. That’s a key reason we outperform peers.

Lesson #5: Be stupidly ambitious

It’s incredible how many new VCs, when asked “What kind of institution do you want to be?” say they don’t know. “We want to invest in great companies, be the best partners for founders.”

Ugh. That’s like a startup saying: “Our goal is to maximize shareholder value.”

Have a real ambition, and say it out loud.

When we started, our simple ambition was: beat Polychain.

That was it. Polychain was the benchmark for crypto VC. Later, when we actually started surpassing it, I realized I had to upgrade our goal: become a Top 3 crypto fund. That goal drove us for a long time. Now, I think we’re already Top 3, so the goal shifted to Top 2, then Top 1. Where we are now, I’ll leave to readers to judge.

Lesson #6: Pretend you’ve achieved it, then really do it

When you have no brand with your first fund, you must use whatever social proof you have to fake a brand.

Get into hot deals, even small amounts. Collect logos, use logos to get more logos. In Fund I, we wrote tiny checks into many hot companies: dYdX, Anchorage, Starkware. These amounts didn’t matter, but the names gave us leverage to move forward.

We called ourselves a “research-driven fund.” Research meant writing blogs like “What if this is crazy?” We called it Dragonfly Research, and back then, that was considered research.

We claimed to have the strongest connections in Asia. That was true in theory, but initially, we didn’t know what others wanted from Asia. We told stories while exploring in real-time, gradually systematizing. At first, we just pushed stories out— and it worked.

Lesson #7: Trends are not your friends

Resist the temptation to chase trends. Crypto is full of foolish fads: NFTs, TCRs, P2E, chat tokens, meme coins backed by VC…

Our most successful investments often came from avoiding madness—and heavily backing when others gave up. We didn’t touch Terra, Axie, Yuga; after Terra collapsed, we invested in Ethena’s seed round; before the 2024 election, we invested in Polymarket.

Every cycle has an irresistible narrative. You feel pressure from teams, LPs, Twitter. But most hot trends end up being money-wasters.

The real challenge is psychological. When you reject all the projects everyone is rushing to, and they double in a week, you feel like a fool. But chasing trends often results in a “portfolio of projects that were popular 18 months ago”—the worst way to allocate.

Your job is to invest in things that matter 3–5 years later, and hot markets rarely have that foresight.

Lesson #8: Control your distribution

Someone once said a16z is a “media company with VC business,” which was a joke then, but now it’s just fact.

VC is fundamentally storytelling. You must build an audience, making the entire team a signal source. Encourage members to build personal brands, reward them for speaking out. VC branding, unless you’re Sequoia, is almost entirely tied to individuals. It’s a “people” business.

Some funds even ban employees from tweeting—I can’t understand that. If you want founders to master social media, why can’t you?

Lesson #9: Cultivate influence

This is a key step from a rookie to a heavyweight.

As Dragonfly’s influence grows, many doors start opening automatically. Exchanges, banks, market makers, even projects we haven’t invested in, want to build relationships. At first, I thought it was interference: why talk to old institutions instead of focusing on new deals?

Later, I realized: VC’s essence is branding money. You win deals because founders believe your money is better than others’. In fact, all money is green.

Marc Andreessen once said: “VC’s job is to lend your brand and influence to those who don’t have it yet.” So, you need both a brand and influence. Founders want to know if you can get them into rooms, if your voice carries weight.

As the fund grows, you must evolve from a simple investor to a platform. Top founders want more than capital—they want you to help push things forward. We built a platform team at Dragonfly, supporting everything from token design, exchange launches, to executive recruitment. It’s not sexy, and it doesn’t directly generate returns, but it compounds. Once the flywheel spins, competitors find it hard to copy.

Lesson #10: Almost all money comes from a tiny fraction of deals

There’s a simple matrix that describes the essence of VC investing.

Many hot projects are “correct consensus” deals—that is, most believe this company will win, and it does. These deals aren’t bad, but it’s hard to make much money because they’re often bid up early.

Almost all real profits come from “non-consensus but correct” deals. These tend to be undervalued structurally, and the chance to get 100x+ returns is almost entirely here.

VC returns follow a power-law distribution, and math is ruthless. In a typical fund, the top three deals often generate more than all others combined. This means most deals are not individually important. What matters is whether you hit one or two “fund-defining” projects.

This leads to an counterintuitive conclusion: your hit rate is almost irrelevant. What really matters is how many “big punches” you throw. So, when evaluating each project, ask yourself: could this become a “fund-returner”?

If not, why invest?

And the equally brutal corollary: consensus deals rarely produce this result. If everyone thinks a project is great, the price already reflects that, and your upside is capped. Truly generational investments are often those that other smart people think are foolish to invest in.

Lesson #11: If you can’t win this deal, everything before is meaningless

The value chain of VC can be broken into four stages: Sourcing => Selection => Winning => Supporting

Finding deals is the first step. You must build a sustainable engine to continually find projects.

Judging is what most people think is the most important skill (“picking projects”), but in reality, it’s only a small part of the game.

Winning deals is the most critical. Even if you have the best sourcing and judgment, if founders pick someone else, it’s all pointless. The highest-level resource in venture capital is “access.” Top founders are oversubscribed and can choose their investors. So you must give them a reason to choose you. That comes down to brand, platform, long-term relationships, and reputation—all the lessons above come together here.

Post-investment support is the final step, but it also reinforces “sourcing” and “winning.” Support determines your NPS (Net Promoter Score) and whether this cycle continues. If you truly stand with founders, they become your best salespeople: introducing you to the next great founder, vouching for you in small circles. The industry is small and closed; reputation spreads fast. An angry founder can ruin ten deals; a truly satisfied one can open doors for ten years.

Lesson #12: Venture capital is a “slow wealth-building” business

You’ll see many in this industry rise rapidly, becoming shooting stars.

You must outlast them. Some make too much, too fast; some get lazy, start believing they’re destined for success. The crypto industry’s selection is especially brutal. Every cycle produces overnight millionaires; most of them disappear afterward. Traders who made 50x move to Lisbon; founders with absurd valuations quietly shut down. Eventually, the tourists leave.

You are not a tourist. In VC, progress takes years. There’s no real “overnight success.” Most of your fund’s value remains unrealized for years. This makes you the embodiment of that famous New York Times article—

That’s okay.

Your job is to steer the ship steadily. Flotsam, wreckage, high tide, low tide—these will happen. You must always be there, with your team, your founders, and the entire ecosystem. Your reward is to serve as long-term capital.

So, be truly long-term.

Lesson #13: When fundraising is easy, go raise

Founders hate fundraising, and VCs are no different—nor is it easy.

Fundraising as a VC is a completely different culture from founders’ fundraising. I come from a middle-class background. As a professional poker player, I thought I’d seen “wealthy people.” Later, I realized—completely different scale.

Raising capital is an art, highly dependent on who you’re talking to.

Family offices rely on relationships. These are multigenerational wealth families with unique logic; building trust takes time. They heavily depend on social proof.

Institutional funds and fund-of-funds are a different breed: process-driven, heavy due diligence, more about spreadsheets than dinners. They want to see performance, process, and sustainable advantages.

To be a truly excellent fundraiser, you must master both languages.

But overall, successful fundraising hinges on one premise: you must be in good shape—either already having returns, or telling a compelling story about where returns will come from.

And finally, the most crucial point: timing is everything.

LPs almost always buy high and sell low. So, you should do the opposite. It sounds simple, but it’s extremely painful in practice.

Your best fundraising window is often when the market is hottest and LPs are most excited—and that’s precisely when you should be cautious about deploying capital. When the market crashes and everyone’s sentiment is low, that’s when LPs least want you to invest—but that’s exactly wrong.

Top VCs learn to fund when conditions are best and deploy when prices are most attractive. But these two rarely happen at the same time.

That’s what I’ve learned building Dragonfly. I’m sure I’ve missed some lessons, and undoubtedly, there are many I haven’t learned yet.

Building a VC is a constantly changing game. Every cycle, new players emerge, and some mistakes you could easily avoid are still waiting for you at the corner.

But the core principles never change: stake your reputation; find your advantage; do the dirty, unglamorous work others avoid; hire better people and treat them well; and—be patient.

Venture capital rewards those who stick around long enough to see the other side of the cycle.

This isn’t the “ultimate guide” to building a VC. But it’s the kind of article I wish someone had written for me back then. I hope it helps you. If you’re doing something cool in crypto, feel free to reach out.

Disclaimer: This article does not constitute investment advice. Building a VC fund is hard—you will probably fail. But who knows—maybe you should try anyway.

Good luck.