Venture Fund Portfolio Construction | Journal | Kauffman Fellows

VC is a Power Law business which means only a few cos deliver most of the returns - David Clark from VenCap breaks it down with data on 11.350 companies from 259 funds from 1986 - 2018. Only 1.1% out of 11,350 cos returned the whole fund!

David Clark responded to my tweet that median fund size for fund returners was $350M and many funds >$1b

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A capital allocator would need to have two things happening simultaneously.

1. Limited fund size: The fund would need to be $150M or less, or otherwise, you’ll be back to being wholly subject to the power law.


2. Equity optionality: Investors in a startup utilizing this product need to be able to get returns even if the outcome is smaller. That would req

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one of the most interesting pieces of information we found through our analysis is that Great Funds know how to concentrate capital exceptionally well.

Great Funds invested 38.7% of their capital in 23.1% of their investments, which generated over 5X+. 23.9% of that capital went into their 10X+ investments.

Good Funds on the other hand invested 18.... See more