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Shardul Shah: How Index Makes Decisions & Why Benchmarks & Averages in VC are BS | E1202

Shardul Shah is a Partner at Index Ventures and one of the greatest cyber security investors of the last two decades. Among his many wins, Shardul has led rounds in Datadog, Wiz, Duo Security, Coalition and more. Shardul is also the only Partner investing at Index to have worked in every single Index office from London, to SF, to NYC to Geneva. Prior to Index, Shardul worked with Summit Partners, focusing on healthcare and internet technologies. ----------------------------------------------- Timestamps: (00:00) Intro (05:52) Deciding Between Personal Meetings & Delegation (06:49) Why Specializing in VC is Crucial (07:51) Navigating Mental Plasticity Across Investment Stages (11:22) Valuations: Striking the Balance Between High & Too High (13:32) Balancing Execution, Market Timing, and Sizing Risks (15:51) Has Shardul Misread a Founder’s Potential? What Went Wrong? (17:24) How Capital Requirements Affects Shardul’s Investment Strategy (22:37) The Hardest Part About Doubling Down on Investments Like Wiz (26:03) How To Balance Debate & Team Harmony (31:10) Importance of Signaling for Founders with Multi-Stage Funds (33:34) Tips for Structuring Angel & Operator Allocations (34:27) Best & Worst Areas: Sourcing, Selecting, Securing, Servicing (36:35) Key Lessons on Being an Effective Board Member (40:02) How VCs Can Be Damaging on Boards (41:18) Right Timing on Selling & Taking Liquidity (44:35) The Future of Venture: Boutique Firms vs. Cash-Rich Giants? (46:40) Quick-Fire Round ----------------------------------------------- In Today’s Episode with Shardul Shah We Discuss: 1. Investing Lessons from Wiz and Datadog: Why does Shardul believe that TAM (total addressable market) is BS? Why does Shardul believe that every great deal will be expensive? How does Shardul evaluate when to double down and concentrate capital vs when to let someone else come in and lead a round in an existing company? How does Shardul think about when is the right time to sell a position in a company? 2. How the Best VCs Make Decisions: How does Shardul and Index create an environment of truth-seeking together, that is optimised for the best decision-making to take place? What are the biggest mistakes in how VCs make decisions today? Why does Shardul believe that all first meetings should be 30 mins not 60 mins? Why does Shardul believe it is so much harder to make investment decisions when partnerships are remote? What is better remote? 3. The Core Pillars of Venture: Sourcing, Selecting, Securing and Servicing: Which one does Shardul believe he is best at? What is he worst at? Does Shardul believe with the downturn we have moved into a world of selection and not just winning every new deal? Does Shardul believe that VCs provide any value? What are the biggest misnomers when it comes to “VC value add”? 4. Lessons from the Best Investors in the World: Who is the best board member that Shardul sits on a board with? What has Shardul learned from Gili Raanan and Doug Leone on being a good board member? What have been some of Shardul’s biggest investing lessons from Danny Rimer? Why does Shardul hate benchmarks when it comes to investing? ----------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Shardul Shah on Twitter: https://twitter.com/shardul_shah Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #shardulshah #venturecapital #partner #indexventures #investing #wiz #datadog

Shardul ShahguestHarry Stebbingshost
Sep 15, 202449mWatch on YouTube ↗

At a glance

WHAT IT’S REALLY ABOUT

Why Power Laws, Not Averages, Should Drive Every VC Decision

  1. Shardul Shah of Index Ventures explains why venture capital must be driven by power-law thinking and fund-returning outcomes rather than benchmarks, averages, or “good deals.”
  2. He emphasizes conviction-based investing, elastic views on price, and a deep focus on founders over markets, while warning against overthinking TAM, underestimating great founders, and trying to copy others’ styles.
  3. Shardul details how Index builds conviction across stages, doubles down on winners like Datadog and Wiz, and structures partnerships, decision-making, and boards to find and support outlier companies.
  4. He also discusses career development in venture, specialization, board dynamics (including when VCs are harmful), and how to construct cap tables and relationships that truly help founders.

IDEAS WORTH REMEMBERING

5 ideas

Optimize for power-law outcomes, not averages or “good deals.”

Shardul argues venture is about finding a few fund-returning outliers; chasing safe 2–3x returns or benchmarking to averages misaligns the entire strategy and leads to underweighting truly exceptional opportunities.

Don’t be cute on price or over-obsess about TAM.

When conviction in a founder and opportunity is high, he believes investors should be elastic on price; TAM sizing is often wrong anyway, as many public companies exceed their original TAM estimates and great founders expand markets.

Back teams, not markets, and avoid overthinking competition and timing.

Shardul prioritizes founder quality—imagination, operational excellence, and decision-making—over market analyses, acknowledging he’s often misjudged market dynamics (e.g., endpoint security) but sees missing great founders as the true error.

Rebuild the investment case every time you double down.

For follow-ons, Index doesn’t simply average down or incrementally increase ownership; they effectively run a fresh process—new customer calls, competitive analysis, models, and partner “shadow” input—to test whether the company can still be a fund returner.

Authenticity and focus beat political games in venture careers.

Shardul rejects the idea of “playing the ladder game”; at Index, progression comes from mentorship, apprenticeship, and finding fund-returners, not assimilation. Being yourself, developing a concentration, and using time intentionally matter more.

WORDS WORTH SAVING

5 quotes

The lessons to learn are don't be cute on price, don't underestimate fantastic founders, and don't overthink it.

— Shardul Shah

TAM is a trap. The best founders find and expand market opportunities.

— Shardul Shah

We're in the business of finding fund returners. The power law dominates our business.

— Shardul Shah

I’m not seeking average returns. I’m not seeking good deals. I’m looking for outliers.

— Shardul Shah

There’s no such thing as a safe 2X.

— Shardul Shah

Power law dynamics in venture and rejection of benchmarks/averagesFounder-centric investing: selection, conviction, and what makes fund-returnersPrice, TAM, and risk: why “TAM is a trap” and “don’t be cute on price”Conviction building and doubling down on winners across multiple stagesFirm culture, career development, and authenticity in venture partnershipsBoard roles, governance, and when investors are value-add vs. destructiveSeed and multi-stage dynamics: signaling, cap table construction, and angels/operators

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