This podcast explores the concept of performance persistence in venture capital, questioning the widely held belief that smaller funds consistently outperform larger ones. Through an analysis of PitchBook data, the discussion uncovers the issue of survivorship bias, which shows that successful funds are more likely to share their performance data, creating a skewed perspective in the industry. The speakers point out that returns follow a power law distribution, where a small fraction of investments accounts for most of the gains, even among growth-stage funds. Vencap’s historical data since 1985 suggests that the best strategy is to focus on consistently high-performing managers, regardless of fund size, rather than pursuing smaller funds that appear to excel temporarily. By identifying managers who reliably support top-tier founders, investors can achieve superior long-term returns.
