Origins - Inside Venture Capital, Hosted by a GP and an LP
Revisiting Power Law VC Performance with David Clark
Feb 20, 2025
In a deep dive with David Clark, an Investment Director at VenCap International plc, listeners gain insights from his nearly 40 years in global venture capital. He uncovers that 50% of VC investments fail to return capital, sparking a vital discussion on how LPs can identify top-performing managers. David emphasizes the significance of a data-driven approach, revealing findings from 30 years of data which can reshape LP strategies. The talk also highlights the importance of mentorship and building lasting relationships in the complex VC landscape.
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Quick takeaways
- Vencap International's strategic shift towards established managers is driven by historical performance data that reveals high failure rates among emerging funds.
- Over half of VC funds fail to return capital, highlighting the critical importance of identifying a few high-potential companies that drive significant returns.
Deep dives
The Evolution of LP Strategies
Investment strategies among limited partners (LPs) have evolved significantly over time, particularly at Vencap International. Initially, a reliance on selecting managers led to disappointing returns, with most funds producing less than double the capital invested. This prompted a thorough data-driven analysis, revealing a pattern: only a small number of managers consistently outperform. Consequently, Vencap's focus shifted toward backing established managers who can reliably access top-performing companies, illustrating a strategic pivot based on historical performance data.
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