10+ hours of podcasts, in 5 minutes.
9 quotes from 1 episode on How I Invest, each with a timestamped link to the source.
Erik Syvertsen states that securing allocations in known breakout companies drives venture capital returns. A $500 million middle-market fund struggles to compete against established brand moats.
Information alpha disappears when investors assume the best companies are already known.
“If you assume that the best companies are known, there's no information alpha…”
The most successful venture rounds carry higher upfront prices on average.
“The rounds that end up having higher outcomes are higher priced upfront on average…”
Investors maximize returns by aggressively sizing up their positions in winning companies.
“That's kind of been to me the most surprising part is just the importance of then being able to size up and concentrate in the things that are working.”
A portfolio of 500 companies reaches a 90% probability of holding an outlier. This math shows that extreme power law outcomes dictate venture strategy.
“If you get something like 200 companies, you'll get this is just basic probabilities math, you'll get something like 65% probability that one of those companies will be a breakout. If you size it up to about 500 then your probability goes up to about 90%.”
“Power law is the story of venture. It's access and power law. And the two actually kind of go together causally. Our data just very strongly supports that power law is real and extreme.”
A $500 million generalist fund carries too much capital for boutique access and lacks the mechanical brand moat of a mega-fund. Returns concentrate among small access-driven managers or established brands.
“Those two strategies of backing the managers who have great access or building a cathedral, I think, are the two ways that you can win venture today. It's the whole middle market that is challenged in this model where you have a $500 million fund.”
From Erik Syvertsen on Venture Capital: Why Mid-Market Funds Fail
“It is just mechanical. It's not like a hedge fund manager who has a model that's working or a particular skill here. There's an autocorrelation to it. The brands they've built are truly moats.”
From Erik Syvertsen on Venture Capital: Why Mid-Market Funds Fail
OpenAI, Anthropic, and SpaceX currently account for $5.2 trillion in private market value. This concentration exceeds the entire $4 trillion total generated across all private markets over the previous two decades.
“…showing that just in the current round of IPO you have kind of 5.2 trillion in value coming from OpenAI, Anthropic, and SpaceX alone and the last I think it was 20 years you had kind of four a little over four trillion in total value so we're having more than two decades of private market value kind of in three companies today in the private markets.”
“USVC is a project that we've worked on at AngelList for years on the policy front. It is a 40-Act registered fund that provides evergreen access to venture capital in a tender offer wrapper.”
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The week's private equity podcasts, boiled down to one short Sunday read, for deal professionals, operating partners, and LPs.
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