Time diversification

In venture capital, the timing of fund deployment is crucial. Some funds expedite their deployment within 18 to 24 months to quickly launch subsequent funds, optimizing for speed and size rather than for long-term returns. Traditional wisdom suggests a 36 to 48-month deployment period to allow for more strategic investments and steady capital allocation. However, while elite firms like Benchmark and Sequoia maintain a focus on small fund sizes to pursue high-impact 'grand slam' investments, many others compromise by prioritizing fund velocity and size, leading to diminished returns. This lack of time diversification undermines a firm’s competitive advantage, as they forfeit the potential benefits of structured capital deployment that could enhance overall return outcomes.