Origins - Inside Venture Capital, Hosted by a GP and an LP

Power Law VC Performance with David Clark (VenCap)

Dec 13, 2023

In this podcast, Nick Chirls, Beezer Clarkson, and David Clark discuss the challenges and strategies for unlocking performance in venture capital investments. They explore the role of emerging managers, the significance of dollar sizes and returns, and the importance of focus and long-term commitment. They also analyze venture capital performance data, discuss return expectations, and share valuable lessons from past market cycles.

56:19

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Episode guests

David Clark

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Episode notes

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Quick takeaways

Prioritizing managers with a proven ability to access top-performing companies is crucial for generating strong returns in venture capital.

Early-stage funds with companies that generate the entire fund's returns are more likely to outperform.

The speaker's firm primarily invests in established managers with a track record of consistently investing in top-performing companies.

Deep dives

Importance of Focusing on Top Performing Managers

Focusing on managers who consistently outperform is crucial for generating strong returns in venture capital. Through an analysis of their own portfolio data, the speaker's firm found that a small number of managers consistently produced high returns, while the majority delivered disappointing performance. By prioritizing managers with a proven ability to access top-performing companies, the speaker's firm has built a concentrated portfolio of around a dozen managers. They emphasize the need to recognize and win highly competitive deals, as well as the importance of pattern recognition and experienced judgment in successful venture investing.

Introduction

2min

Analyzing Venture Capital Performance Data

13min

The Importance of Dollar Sizes, Returns, and Commitment in Venture Capital Investments

20min

Examining Venture Capital Fund Performance and Return Expectations

4min

Fund Models, Expectations, and Strategy Drift

1min

The Importance of Focus and Lessons from the Dot Com Boom and Bust

3min

The Current State of the Venture Market and Future Outlook

14min

In the last Origins episode of the year, Nick Chirls (Notation Capital) and Beezer Clarkson (Sapphire Partners) host David Clark, Investment Director at VenCap International plc.

With nearly four decades of experience in investing, David has backed some of the most established VC funds across the US, Europe, China and India and shares historical figures on where to find performance in venture. David recently uncovered 30 years of data from 400+ funds with 15,000+ underlying portfolio companies and found that 50% of VC investments don’t actually return capital. So how does an LP unlock performance and find the enduring managers?

Three individuals with three unique strategies - Nick (emerging manager), David (LP investing in established), and Beezer (LP investing in emerging & established) – find out how their models differ, where perspectives intersect and what David’s return data shows.

⁠https://twitter.com/nchirls⁠

⁠https://twitter.com/beezer232⁠

https://twitter.com/daveclark85

Links:

David on TVPI vs DPI: https://twitter.com/daveclark85/status/1729188482919383202?s=20

David on power laws: https://twitter.com/daveclark85/status/1693976973079462366?s=20