Kate Simpson

So

we expect a relative high loss ratio in venture funds.

We track graduation rates as an interim predictor of performance.

But at the end of the day, we care less about the loss ratios and more about portfolio exposure to those outsized winners.

VC is obviously driven by power laws, right?

Only a few companies each year

drive returns in the industry and in our portfolio.

So it's our job to pick the managers that we think can identify and lean into those outliers.

To capture those outliers is a non-negotiable for larger funds in order to produce strong returns.

But the reality is not every VC is going to have a power law company in its portfolio.

That's just a reality given the

the relatively small number of power law companies there are relative to the number of venture funds and capital being deployed in venture.

So if your fund is not sized appropriately, if your ownership targets are not appropriate for that size, you run the risk of underperforming.

And that's why venture funds have this really broad skew of returns.

And then there's always this luck factor, right?

There's always a little bit of good luck that accompanies the best portfolio construction and the good skill of any manager.

I think a 5X...

is achievable without one of these power law companies in your portfolio.

If you're a small fund, it's much harder.

It's much harder to do that with a multi-billion dollar fund.