"Turpentine VC" | Venture Capital and Investing  cover image

E23: Tomasz Tunguz on the Theory Behind Theory Ventures

"Turpentine VC" | Venture Capital and Investing

NOTE

Balancing Diversification and Concentration in Investment Portfolio

LPs prefer highly concentrated funds to move parts of their diversified portfolio, while GPs take greater risk with concentrated firms. Concentration leads to high multiple funds due to the power law effect where median and average are zero. The goal is to have capital closer to the y-axis for better returns, hence creating funds that support this strategy is a primary goal.

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