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Why portfolio construction matters more than picking winners in venture

The Full Ratchet · Investor Stories 460: The Math Behind Venture Returns, When...

“everyone should recognize this because there are, as everyone knows, very few big winners in any portfolio.”

1:59 / 2:34

everyone should recognize this because there are, as everyone knows, very few big winners in any portfolio. And of course, if you knew which ones were gonna be those in advance, why did you do all the other ones? So I don't think anyone just really knows. Right. I so I don't think anyone knows what the winners are gonna be. And therefore, how you build a portfolio is what determines how successful the overall strategy is going to be. And I think this is something that in the past I've underthought.

About this clip

A venture investor reflects on the fundamental challenge of venture capital: no one can predict which investments will be the big winners. Since the few massive successes drive all returns, the key to venture success isn't selection ability but how you construct your overall portfolio strategy.

Why this clip

This clip captures a core venture capital insight that challenges the common assumption that successful VCs are just better at picking winners.

1:59 - 2:3435sframework
portfolio-constructionventure-returnsinvestment-strategy

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What they said next

Why big winners don't matter if you size your investments wrong

2:30 - 27s · personal lesson

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