1/ Let me selectively unpack core findings in this phenomenal series by @ahmadmbutt - link.medium.com/WTCuXXX61R
@ahmadmbutt 2/ Dollars should be focused into capacity constrained strategies that attack the early stages. Venture does not scale.
@ahmadmbutt 3/ There are no signs that this is not a good time to enter the asset class. Technology led innovation is pervasive and cumulative.
@ahmadmbutt 4/ The industry returns are driven by “prescient GP and outlier founders”. With very few exceptions - firm advantages don’t matter.
@ahmadmbutt 5/ Investing with more metrics means less alpha. Period.
@ahmadmbutt 6/ the best early stage investors are “foxes”- polymaths with broad peripheral vision.
@ahmadmbutt 7/ Market timing is hugely important - ie capturing technologies at the correct inflection point as driven by market forces.
@ahmadmbutt 8/ there is no structural barrier to entry for new managers. (Relevant) networks are hugely important but attached to partner not firm, so there is no cold start problem.
@ahmadmbutt 9/ good funds that have deliberately constrained themselves continue to operate in the top quartile. Or as I always put it, “capital constraints are your friend”.
@ahmadmbutt 10/ on the flip side: AUM creep dilutes returns.
@ahmadmbutt 11/ historical data shows that a concentrated portfolio (<25) offers the highest upside - here go read @ganeumann 👍
@ahmadmbutt @ganeumann 12/ reserves management is critical - capital and time must be concentrated in the winners. Note everyone understands this conceptually but many firms and GPs do the exact opposite.
@ahmadmbutt @ganeumann 13/ generalist firms that can rapidly appraise and capture the inherent value in technological breakthroughs have historically captured the outliers.
@ahmadmbutt @ganeumann 14/ whilst VC is auto correlated and initial successes matter - there is strong evidence of mean reversion as GPs struggle to stay hungry and mentally agile (paraphrasing here).
@ahmadmbutt @ganeumann 15/ if I now look at the strategy @HarryStebbings and I are inplementing at @stride_vc — it goes like this:
@ahmadmbutt @ganeumann @HarryStebbings @stride_vc 16/ small by design with no desire to grow fund size + concentrated portfolio + invest when data is ambiguous + avoid market timing risk like the plague + find founders we never have to replace + proudly anti-thematic. You can se why this is music to my ears 😂. EOT
