The Exception, Not the Rule (#20)
How to spot what’s rare, what’s real, and what’s still misunderstood in a market obsessed with consensus
Welcome to the 20th Edition of Public School Ventures’ School Bulletin!
Preamble: Rules Were Meant to Be Broken
Too much of the venture ecosystem is still built for averages.
But this game has always been about outliers.
The best allocators? They invest in venture firms that produce outlier funds, which can yield returns of 50 times or more, despite the rule being that average venture funds typically produce returns of 1x or less.
The best general partners? They invest in founders who produce billion-dollar exits, despite the rule that 90% of startups fail.
The best founders? They build what doesn’t fit a paradigm and hire operators who can integrate and execute a vision, despite the rule that 80% of employees are underperformers.
The best operators? They scale what others call unscalable.
And the best general partners? They don’t just follow heat—they train their eyes to spot a signal before it’s obvious.
This 20th edition is about those people—the ones who don’t fit the rule. They are not positioned to be average. They are positioned to be exceptions, despite the rule saying it’s best to be safe during times of uncertainty.
Whether you’re designing your firm, backing your next team, or still building conviction in this market, I hope this edition helps you spot what’s rare, what’s real, and what’s still misunderstood.
Here are the concepts from my many meetings this month that stood out:
Post-AI Moats Start with People – A new equation for defensibility when information is free, ICP is fluid, and execution is the edge.
The Fast Learners Who Build Moats – Why a team’s learning velocity is the new unfair advantage (and who really drives it).
Delayed Gratification Is a Muscle – Why I’m launching Groundwork and Carry On now—and betting on the long arc.
What you are about to witness is my thoughts. Just what I was feeling at the time. Enjoy.
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Essay 1: The Exception Not the Rule
Venture has a math problem.
Most funds won’t return. Most startups won’t survive. Most careers will stall.
And yet, most decks, LP pitches, and market analyses still assume a bell curve where “solid” is good enough.
But venture isn’t built for the middle. It’s built for the exceptions.
The $1B+ outcome.
The non-founder hire who makes everything better.
The GP who raises an oversubscribed fund in a market where no one is allocating.
So why do we still underwrite it like private equity?
Private equity is a rules-based asset class. Buyout fund managers make investments, “add value,” and expect a 2x return in a specific time frame. And they can’t afford for any investment to fail—it would mess up the rule.
Venture capital, though, is powered by the power law. It’s an exceptions-based asset class.
A successful venture fund must have at least one outlier to work. One that defies the rule that 83% of venture firms don’t raise a fourth fund.
So again, why do we underwrite to consensus at the early stage?
Even if prior paradigms and patterns yielded outsized returns, those returns today could be compressed and provide more noise than signal.
I think we’re currently in a shift:
Macroeconomic policy.
Corporate American norms.
Access to information thanks to GenAI.
Even what’s considered “venture-backed.”
It’s time to break and restructure paradigms—to define what’s an exception and what’s a rule today.
The best founders are exceptions to multiple rules:
They don’t look the part.
Their ideas feel too early, too weird, too hidden—until they’re suddenly inevitable.
They’re not chasing trends—they’re chasing truth.
And the best investors? They know how to spot that.
Not because they’re smarter, but because they’ve trained their lens on outlier behavior, not past pattern-matching.
To back an exception, you have to:
Tolerate ambiguity longer than the market
Build conviction with less data and more judgment
Earn trust with people who are still being underestimated
That’s why I’m building Stresswood—to find and back the people who don’t fit the mold but bend the arc.
The overlooked engineers. The underestimated markets.
The visionaries who aren’t trying to play the game—they’re trying to redefine it.
Which institutions win in this business?
The ones that don’t just underwrite traction.
They underwrite possibility.
They know the difference between noise and signal, between polish and potential.
They look where others don’t.
They wait when others bail.
They bet on who might become exceptional, not who’s already validated.
We say we’re in the business of outsized returns.
Let’s stop underwriting average.
Because the next iconic companies won’t look like the last.
And the people who fund them?
They’ll be exceptions, too.
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Essay 2: Operators Are the Moat
If you believe the best companies are the exception, not the rule, then you also have to believe that breakout outcomes come from more than just founders.
They come from the operators behind them.
The RevOps lead who translates chaos into cadence.
The Lead Engineer who makes scale a reality.
The Chief of Staff who protects the founder’s focus like it’s product-market fit.
These aren’t headline-grabbers. They’re velocity builders.
TechCrunch won’t cover them.
LPs won’t ask about them.
Twitter won’t trend them.
But founders know.
Every great founder has one. Sometimes two or three.
Without them, everything stalls.
They bring:
Trust – The founder makes the call; the operator makes it real.
Clarity – They see around corners before the wall hits.
Continuity – Through pivots, team changes, and capital crunches, they’re the stabilizer bar.
When I think about what I want Stresswood to stand for, it’s this: we see the whole team.
We underwrite more than just the vision—we underwrite the execution engine.
Because great ideas don’t win.
Great execution does.
That’s why I’m launching a new podcast: Exceptions.
Yes, another podcast. (I promise I’ll only have three going forward.)
It’s for the operators behind the outliers.
The ones who don’t post threads.
The ones who aren’t pitching VCs.
The ones who make it all work.
Each episode will spotlight the people who turn momentum into muscle.
We’ll explore how they think, how they navigate chaos, and how they build trust when everything’s on the line.
If that sounds like a series you’d want to sponsor—or if you know a non-founding operator who deserves the mic—hit me directly.
Because in this cycle, moats won’t be found in decks or data rooms.
They’ll be found in exceptional people.
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Essay 3: Delayed Gratification Is a Muscle
Everyone wants to talk about breakout results.
Very few want to do what creates them.
We’ve glamorized the result but overlooked the rhythm—
The years spent learning the terrain, compounding reputation, sharpening insight.
That’s the real work.
And I’ve learned that’s the real joy as well.
Venture isn’t just about capital. It’s about timing.
And what appears to be timing from the outside often appears to be patience and preparation from the inside.
This month, I’ve been thinking (and speaking with founders, allocators, and operators) about what it means to build in obscurity—
To cultivate something before it’s obvious to others.
Like a bamboo grove, the early stages are mostly rootwork.
You water.
You protect.
You don’t rush the growth.
And if you do it right, the shoot will come. It always does.
But you don’t control the season—you control the soil.
That’s how I’ve approached this next chapter of building Stresswood.
I’ve quietly been working on something called Groundwork—a digital portfolio of everything I’ve written, shared, and synthesized across venture, tech, society, and culture.
Think of it as my thought record.
Not a resume. A space where I’m not just reacting to the market—I’m recording how I see it shift.
The best founders track customer insight like it’s gospel.
This is my version of that.
Groundwork isn’t a flex—it’s a foundation.
For LPs, founders, operators, or friends just trying to understand how I think and where I see the opportunities to partner with once-in-a-generation founders.
And here’s where the muscle comes in:
This isn’t content for clicks.
It’s an investment in trust.
It’s me turning the long game into public compounding.
Because in a world obsessed with overnight wins,
I still believe in the ten-year success.
And if you’re playing for legacy, not likes—
You’re probably building something that lasts, too.
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Closing: With Gratitude
If you’ve been reading since Issue 1—or you’re just now joining—thank you.
This newsletter has always been more than updates.
It’s a way for me to connect the dots out loud, test ideas, and sharpen my POV in public.
And now, with the launch of Groundwork and the expansion of Swimming with Allocators into Exceptions, I’m doubling down on the long game.
If you want to partner, sponsor, or collaborate on any of this—let’s talk.
I’m looking to bring GPs and LPs together across the country for deeper conversations, smarter capital, and better relationships.
And if something here resonated—please forward it to someone building something rare.
Because the people who break through in this market?
They’re not the rule.
They’re the exceptions.
— With gratitude,
Earnest Sweat
General Partner, Stresswood