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Optimizing fund structure, GP market fit, & more with Screendoor’s Jamie Rhode | Episode 1917
This Week in Startups
Portfolio of 50 to hit outlier
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The key to successful early stage venture investments lies in understanding the power law dynamics, where a small percentage of startups generate significant returns. To build a portfolio that captures these high-return opportunities, investors need exposure to the edges and tales where big winners emerge. This entails investing in fund managers covering the first institutional check and diversifying across enough managers to ensure a broad sampling of potential outliers. With 98% of startups yielding subpar returns, the focus is on maximizing alpha by targeting the 2% that are outliers. By making 50 investments, statistically, one outlier could significantly impact the overall portfolio performance, showcasing the importance of a well-constructed early stage venture portfolio strategy.
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