There is ample evidence the venture model is finally innovating (See HERE & HERE), along with the venture industry’s center of gravity expanding beyond Silicon Valley (see HERE).
Some of these changes include:
- Structured multi-round funding strategies (Scout/Opportunity Funds)
- Proper diversification (HERE)
- Standardized reporting and analytics across portfolio holdings (HERE)
The best summary as to why these changes are taking place comes from Mario Giannini, Managing Director of Hamilton Lane ($1T AUM/Advisement):
‘I think portfolio construction is at least 50% of returns in the private markets. But in order to do proper portfolio construction you need data, you need analytics….you need more than just having dinners with GPs saying “…oh, I think this one is good”. ‘I just don’t think the industry as a whole has spent enough time around data & analytics to do (proper) portfolio construction…’
What the optimal strategy would look like:
Institutional Investors Journal of Portfolio Management White Paper
I was invited by Frank Fabozzi, the Editor of Institutional Investors Journal of Portfolio Management (JPM) since 1986, to author a paper summarizing the ‘Why & How’ to construct and manage optimized venture portfolios.
The paper was published in the Sept. ’22 edition of II’s JPM — which focused on the venture and PE asset classes — but can be viewed HERE.
