Mar 8, 2024 · 35m · sourcery
David Weisburd, 10X Capital: Finding Alpha and LP Bias · Sourcery with Molly O'Shea
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Sourcery, host Molly O'Shea speaks with David Weisburd of 10X Capital about venture capital portfolio construction, LP relationships, media presence, and navigating AI tech cycles. Weisburd shares insights on maximizing alpha through concentrated portfolios, managing LP re-up dynamics, and evaluating platform disruption risks for founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Molly holds 19.2% of the talking time here. How this is scored →
Molly as informed peer 3.9 Guest teaching 2.5 Guest disagreement 1.7 Molly pushing back 0.3
speaking balance: gold is Molly, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 24:00 David rejects the 15-year VC evaluation narrative
David forcefully dismisses the common LP talking point that fund performance takes 15 years to evaluate, calling it completely idiotic and nonsensical.
Hardest push from Molly ▶ 25:19 Molly presses David on his contrarian DPI stanceMolly directly challenges David's skepticism toward DPI, asking why he is against distributions when everyone values returning capital.
Biggest teaching moment ▶ 27:55 David explains selling common shares at preferred pricing in mega-roundsDavid delivers a granular breakdown of secondary mechanics, explaining how early GPs sell common-equivalent shares at preferred valuations to SoftBank to optimize DPI.
Molly holds their own ▶ 27:00 Molly cites Mark Suster's proactive secondary playbookMolly leverages her Upfront Ventures alumni background to introduce a concrete, proactive secondary strategy, steering the technical conversation on liquidity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Molly as informed peer | Guest teaching | Guest disagreement | Molly pushing back | Why |
|---|---|---|---|---|---|---|
| Origin Story of 10X Capital & David Weisburd's Role | 2 | 1 | 1 | 0 | Molly opens with standard introductory questions regarding 10X Capital's founding and David's media involvement. David politely clarifies his co-founder title timeline and details his podcast origin stories in an expansive, collaborative monologue. | |
| Podcasting Best Practices and Self-Feedback | 4 | 2 | 0 | 0 | Molly references her institutional LP background and provides insightful commentary comparing VC sales calls to recording feedback. David strongly affirms her observation about repetition requiring feedback mechanisms. | |
| Venture Capital as an Access Class | 4 | 3 | 1 | 0 | David explains why venture capital is an access class rather than an asset class, citing LP perspectives. Molly provides thoughtful context on conflicting macro market signals before David outlines time diversification strategies. | |
| Generating Alpha & Portfolio Concentration Strategy | 3 | 3 | 2 | 0 | David details GP alignment and portfolio concentration, citing academic work by Ken French to challenge conventional diversification. Molly prompts him cleanly on GP positioning without offering pushback. | |
| AI Hype Cycles, Infrastructure, and Verticalization | 5 | 2 | 2 | 0 | Molly poses an informed question about whether AI will remain a distinct vertical or become ambient infrastructure. David delivers an in-depth breakdown of VC trend-chasing hit rates, valuation power law limits, and multi-stage AI ecosystem evolution. | |
| Dilution of Alpha in Scaled Venture Funds | 4 | 3 | 1 | 0 | Molly cites practical partnership examples like Rabbit and Perplexity before asking whether alpha exists in venture. David explains the paradox of fund scaling, showing how mega-funds dilute alpha while attracting sovereign institutional capital. | |
| LP Relationship Bias and Re-Up Dynamics | 5 | 4 | 4 | 1 | Molly draws on her corporate venture fund experience to highlight relationship-driven LP re-ups over performance. David aggressively critiques the conventional wisdom that VCs need 15 years to prove skill, calling it completely idiotic and nonsensical. | |
| Contrarian View on DPI as a Lagging Indicator | 6 | 3 | 3 | 2 | Molly playfully challenges David on DPI and brings up Mark Suster's proactive secondary playbook at Upfront Ventures. David explains his contrarian take that DPI is a lagging indicator and details tactical discipline around selling into SoftBank rounds. | |
| Advice for Founders: Probabilistic Thinking & Platform Risk | 3 | 2 | 2 | 0 | Molly asks for practical advice for early-stage founders navigating platform risk and turbulence. David emphasizes probabilistic decision-making, debunking dismissive heuristics about big tech competition. | |
| Advice for GPs: Portfolio Construction & Alpha Focus | 3 | 2 | 1 | 0 | David outlines the trade-off between targeting reliable 3x fund returns versus pursuing high-conviction 20x alpha. The conversation concludes with a lighthearted banter about anchoring Molly's future fund. |
Statements from this episode (20)
Weisburd: Venture Capital Is an Access Class, Not an Asset Class
“One thing that is probably the most found foundational part about the venture capital ecosystem is venture capital is truly an access class, not an asset class.”
Weisburd: VC Is the Worst Asset Class Outside the Top Quartile
“Venture capital is also the worst asset class on the planet as well. There's not many funds where you can invest and you could lose money or lose like half your money. So venture capital is all about getting into the top, top quartile and getting to those top …”
Weisburd: 2023 and 2024 will be among the largest VC fund vintages
“There were super bullish in 2021, and then they leave, you know, 20, 23, 20, 24, which I believe will be some of the largest vintages.”
Weisburd: Investors should allocate capital in six-to-seven-year increments
“One key thing is to always be in the market, always be time diversified. And there's a very actionable way to do that, which is you make sure you invest in six to seven year increments. So you're putting in a sixth of your money every year to make sure that yo…”
Weisburd: In five years nobody will say they invest in AI
“There may be a future where AI is the same thing, where you, nobody in five years will say I invest in AI, just like somebody won't say I invest in tech, just seen as the entire industry.”
Weisburd: Money managers sell diversification to increase fees and importance
“Essentially, money managers sell diversification as a way to increase their own importance and also to increase fees, some would argue.”
Weisburd: Founders Fund invests up to 25% of a fund in single positions
“He puts in every fund founders fund, I think puts up to 25%. Somebody could correct me, but up to 25%, a single position, they've done that with SpaceX, Airbnb, all these, you know, iconic companies.”
Weisburd: Power laws in VC end around a $100M valuation
“Power laws pretty much end at about a hundred million dollar valuation, right? Depending on obviously like whether stuff will expand, you can't invest out a five hundred million dollar valuation, get a thousand X. It's just the math. Math doesn't work”
Weisburd: 10X Capital is an investor in Anthropic
“So first you, it seems like we're in the infrastructure phase where you have open AI and thropic, which were investor and other Google, you know, Facebook's going with the open source.”
Weisburd: 10X Capital invested very early in Sam Altman's Worldcoin
“We're very proud to be in the first round, I believe, or very early in WorldCoin, one of his other AI companies.”
Weisburd: Benchmark proves high returns are possible by not scaling fund size
“You only have to look as far as benchmark to see what returns are possible for platforms that do not scale.”
Weisburd: Fund scaling attracts the majority of institutional capital despite dilution
“One of the paradoxes of asset management is that as your fund scales, you actually become more attractive to the majority of capital in the markets, not the majority of LPs, but the majority of capital, and you start to get phone calls from people like CalPERS…”
Weisburd: LPs lack true returns data to evaluate VCs until Fund 4
“What's kind of crazy about VC is that you don't really know until fund four. Why is that? Because you typically are raising in two, three year increments. So you don't really know. You don't really have DPI until let's say fund three. So you don't know. You do…”
Weisburd: The idea that VC performance takes 15 years to evaluate is idiotic
“A lot of people say, you don't know until year 15 whether you're good at VC. That's completely idiotic because you obviously have people marking you up. Once you get to a series B, you could sell via secondary. So whether or not you choose to sell does not mea…”
Weisburd: DPI is ground truth for VC returns, but a lagging indicator
“So I think DPI is important. And DPI is kind of like ground truth. Like it's an equalizer. You could be the worst marketer in the world, but eventually like your DPI will catch up. Right? So it is a great equalizer is the most empirical fact, but it is a highl…”
Weisburd: 10X Capital sold heavily in 2021 due to crazy valuations
“We sold a lot of stuff in 20, 21. We didn't time the market perfectly, but we did sell a lot just because we thought pricing were crazy.”
Weisburd sells his positions when SoftBank invests in his portfolio companies
“As a general rule, when SoftBank would invest in one of my companies, I would sell my position or a lot of the position.”
Weisburd: Selling 10% to 20% of big winners generates DPI to raise next fund
“I think you sell 10, 10, 15, 20%. A lot of LGPs get short-term greedy. They're like, well, I wanted to let it ride and get more carry. Well, first of all, I could go down to zero. But secondly, if they're really thinking, you know, strategically, that DPI will…”