Lawee: Venture diversification yields diminishing returns beyond six investments
David Lawee · 20VC: CapitalG Founder David Lawee on Why People Overvalue Diversification in Venture, Why Investment Clubs Are More Successful Than Investment Partnerships & How Growth Funds Think About Portfolio Construction, Loss Ratio & Reserves · Oct 8, 2020 · at 15:32
David Lawee, founder of Alphabet's growth fund CapitalG, discusses venture capital portfolio construction and concentration risk.
0:00 / 0:07exact quote · 7.9s
720p mp4 · rendered on demand · StarZero watermark
“I think people overvalue perceived diversification. I think you get a diminishing return in our business once you get past five or six investments.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from David Lawee
Lawee: Venture capital is overly clubby and white male-oriented
“It's incredibly clubby. And white male oriented. And I don't think that's helping the entrepreneurial world. It's kind of not helping the venture world decision making. So that's the biggest thing. It's also the hardest thing, but it's kind of the biggest thin…”
CapitalG operates as an investment club where partners make individual decisions
“At the core of it is kind of the decision process, and for us, which is extremely unusual for a growth equity fund, we make the investments individually. The group can and does hopefully help inform that, but it's more of an investment club than kind of an inv…”
Investment clubs generate better returns than traditional venture partnerships
“And I was born from kind of looking at a whole bunch of different investment firms and comparing their returns to that of clubs and coming to the conclusion that clubs were actually doing better.”
Lawee: Experience with market cycles causes risk aversion disadvantage in bull markets
“I do feel that there's a little bit of a disadvantage in protracted bull markets of having lived through these cycles, because your experience has taught you to be more risk-averse, and as you're kind of living through a bull market, that's kind of a negative.”