Fred Wilson led me to a string of posts left on Brad Feld's post on the issue: "Are VCs with operating experience more successful?". Brad suggested that a combination of operating experience and "pattern matching" is the key. Fred felt that its a "combination of experience, passion, honesty, integrity, leadership, and smarts that makes a great VC."
I think that having "all the above" certainly can't hurt. But my experience has been that it's the VC team that counts heavily, like in any entrepreneurial venture. The individual is important, but the team can negatively impact any individual VC's talent.
Beyond the team functionality, I think the routes to greatness are threefold: 1/ VC brand and deal flow generation, 2/ ability to pick winning combinations of entrepreneurs with outstanding business opportunities, and 3/ ability to enhance individual portfolio company performance. I think to be good in all areas is critical. However, in my analysis, having met hundreds of VCs in the past 12 years, great VCs are world class in only one or two of these areas.
For instance, Draper Fisher Jurvetson's brand is reknown and attracts early stage entrepreneurs from everywhere on the planet. Insight Partners operational assistance is widely recognized and has lead to outsized investor returns in later stage companies. They are good, and even great, in other areas, but every great VC needs to have a core strength (what I like to call "secret sauce") that separates them from the pack.
(Disclosure: the VC firm I manage has close relationships with both of these firms.)