Kasper Wichmann
Welcome to Balentic Edge, conversations that matter in private markets. I’m your host Kasper – investor, entrepreneur and founder of Balentic. On this show, we explore the people, strategies and ideas shaping private markets today, from GPs building tomorrow’s funds to LPs allocating in a shifting landscape. This episode is brought to you by Orca, an AI-driven compliant platform connecting the right GPs with the right LPs – smarter matches, faster decisions and better outcomes.

Kasper Wichmann
Today we’re joined by David Clark, CIO and Managing Director at Vencap, a specialist fund of funds focused on backing top-tier venture managers globally. With over three decades at Vencap, Dave brings deep expertise in manager selection, portfolio construction, and navigating the power law dynamics of venture capital. Dave is also a frequent and outspoken commentator on all things venture, both online and offline. Welcome, Dave. It’s a real pleasure to have you with us today.

David Clark
Now, thank you so much, Kasper. I’ve been watching some of the sessions you’ve had on. They’ve been really interesting and we’ve had some really good conversations offline. So really nice to be able to get one in the can, as it were.

Kasper Wichmann
Absolutely, agree. Dave, you’ve been at Vencap since 1992. That is a really rare kind of tenure in venture. In fact, in any kind of private markets. Can you take us back to the beginning? What drew you to the asset class and how has your thinking evolved over more than three decades?

David Clark
Yeah, I think it would be fair to say, Kasper, that back in 1992, nobody had heard of venture capital. I certainly hadn’t. I finished university. I had no idea what I wanted to do as a job. I saw an advert in the paper saying, you know, global finance company needs a numerate graduate. And I thought, well, if I don’t apply for that, my girlfriend will see it and she’ll give me a load of grief about it.

So I did and as I started to learn more about what the company was doing and remember this is pre-internet as well. So you can’t just go to the company’s website and figure out what it does. You know, it was really a case of kind of trial and error as part of the interview process and it just sounded really interesting. And I think, you know, over the 30 plus years I’ve been doing it, it’s really lived up to that. think it’s, know, venture capital is never a dull moment. You think you’ve got things sussed and then something new comes around and it totally turns things on their head. So it’s been a really interesting place to spend the last 30 years.

Kasper Wichmann
I can imagine. I want to also just zoom in on how has your thinking as an investor evolved over those 30 years? Because a lot has happened. Not just the dot-com bubble, but everything has changed.

David Clark
it would be fair to say that when I started, I had no thinking on venture capital because I’d never even heard of it. So, you know, I think it was almost, you know, starting from that blank sheet of paper. Vencap was founded back in 1987. We probably spent the first 10, 15 years investing in a way that’s very similar to most other LPs out there in the market, which is meet a load of managers.

focus on the things we think that are important and then try and whittle that list down to a smaller number and then invest in them. And what we found is that the results of doing that were pretty mixed. Some funds had done very well, some funds did really badly, but there was nothing that was really consistently standing out to us to say that, these are the criteria you should be looking at as an LP that are consistently predictive of how a fund is going to perform going forward.

And so really it was kind of in the mid 2000s that we took a step back and said, all right, you know, we’ve been doing this for nearly 20 years. We’re starting to get a really interesting data set that comprises quite a lot of the top tier VC firms, as well as a whole host of others. And it was really starting to interrogate that data set that led us to kind of change our way of thinking about the VC industry and really focusing on a relatively small number of established managers.

Across the life of Vencap, we’ve probably backed over 100 different VC managers. Today, we’ve got a portfolio of about 12 to 13.

Kasper Wichmann
Not a lot compared to what you normally see. Can you dive a little bit more into that for us, for the listeners less familiar with the Vencap? What is your core investment strategy and what does set you apart from the more traditional fund-of-funds or institutional VC allocators?

David Clark
As part of the process of looking at our data, what we’ve tried to do is to go back to first principles and really understand what it is that drives performance in the VC industry. And there’s a couple of things that really jump out. First of all, VC is a power law industry. And so what do we mean by that? When we look at our data, it’s telling us that 60 % of early stage companies don’t return the capital that was invested in them. And actually the bulk of the performance comes from just 1 % of the companies that ultimately exit.

And historically, that’s been 30 companies a year that account for more than half of the entire exit value produced by the VC industry globally. So, all of a sudden, we’ve got that statistic to sort of focus on there. And then we look at who are the VCs that are consistently able to back those top 1 % companies. And you see the same names crop up time and time and time again. And then the third thing we looked at was when we analyzed those

funds that we had invested in that generated a 3x net multiple back to us. We found that for early stage funds, over 90 % of them had at least one company that returned the entire fund. So there are really three pillars of how we think about venture. we’re trying to maximize our exposure to those top 1 % companies. We do that through a concentrated group of managers who have consistently been able to demonstrate their ability to back those very best founders.

And we want to do it through funds where one single company can really move the needle so can return at least one extra fund for an early stage fund and probably half to one X for a later stage fund.

Kasper Wichmann
In a recent interview you said the average venture fund isn’t something you want to invest in. While I would agree with that statement it’s also quite strong. What makes most VC funds uninvestable from your point of view and how do you stay away from them then?

David Clark
so let’s just go back to the average venture fund. You you don’t want to be investing in it. That’s not my opinion. That’s the data. And I think, you know, one of the things we try and differentiate ourselves with Vencap is that, you know, yes, we can stand here and spout forth our opinions and, we have opinions on lots of things, but actually, we really only want to be saying things that are backed up by the data. And so when you look at Cambridge Associates, the average median fund generates a 1.7x and a 9, 10 % IRR. the BBCA published some analysis a couple of weeks ago. The median VC fund in the UK generates a 4 % IRR. So, you know, it’s not me saying that you don’t want to be investing in median funds. The data is telling you, you really don’t want to be investing in median funds.

Kasper Wichmann
Ouch

David Clark
Yeah, so for us, it goes back to those three pillars that we talked about for our investment strategy. We only want to be backing managers that are consistently able to back those top 1 % companies. And that’s our primary filter. So we download a load of data on who are the seed investors, the A round investors, the B round investors, and all of the best companies out there.

And we refresh that every few months and we come up with a screen that says these are the managers that are consistently able to do it. And it’s no surprise, you I think anybody could give you a list of who those top 20 to 30 managers are. And then the second filter is, all right, so now are they getting enough ownership in these companies to return their early stage funds or to significantly move the needle for their growth funds? And when we apply that filter, then we probably get down to a list of 20 to 30 firms.

We were not able, unfortunately, to invest in all of those firms, because getting access to them is really tough. But we want to make sure that we stay really disciplined and not going outside that because our experience is once you go outside of those top 20 to 30 firms, you’re starting to add significant risk to the portfolio without necessarily being compensated by increased performance.

Kasper Wichmann
If you’re not backing the average venture funds, who is? Because as you say, anybody could download that list and slice and dice it and come up with that list of 20, 30 managers who are backing the other ones, X minus 20, 30.

David Clark
I think there are lots of LPs out there. There are lots of newer LPs that have come into the asset class and perhaps are coming in from a private equity perspective where, you know, the difference in performance between funds is much less than what we see in venture. we were backing those funds in the first 15 years of Vencap’s life because we hadn’t really appreciated what fundamentally drives the performance of of the industry. So I think it tends to be a lot of newer investors that are coming into the asset class. Clearly there are a number of investors who have a very positive thesis around emerging managers or smaller funds. They take a view that those are more likely to outperform and so that they’re optimizing for fund size or optimizing for a fund one or fund two. The good thing about the market is that there are lots of different opinions and lots of contrasting opinions and we have ours and it’s done pretty well for us. But we certainly wouldn’t be saying that this is the only way that people can do venture successfully. What we found is that it’s the way that we do venture successfully.

Kasper Wichmann
If you have to learn over 15 years what to do and not to do, would generally speaking, LPs be better off investing in VCs through specialists or not at all? Because that’s a long time to be waiting to figure out how this game works.

David Clark
Yeah, I mean, I do think it takes an entire cycle, a market cycle for you to really understand how the venture industry operates. If you came into the VC industry, let’s say in 2015, for the first five or six years of your experience in VC, you would have a very strong view that maximizing the risk you’re taking is the right strategy. And then all of a sudden, as the market corrects, you find that those are the firms that or those are the funds that actually perform the worst as the market corrects. And so I think it’s having that experience of understanding, first of all, can you have a strategy that captures the gains as the market goes up, but also then protects and consolidates as the market corrects and you’re not giving away all the returns that you’ve generated in the prior period. So I think it’s balancing those two parts of the cycle that’s really important. And also I think, venture capital is very strong on narrative.

And even today, after doing this for 30 odd years, I still walk out of just about every meeting I have with a VC feeling that they have an unbelievable story and I want to invest. That’s how powerful the narrative is in venture. And it’s only by standing back and looking at the data and understanding that actually the majority of those managers aren’t going to perform well, that you really then have the discipline to sort of focus on the stuff that we think is predictive of long-term future performance.

So I think from an LP’s perspective, being able to sort of see funds that they felt really strongly about in the first couple of years, seeing those funds maybe have some initial markups and doing really well, but then either seeing them go on and compounding and doing excellently, or actually some of those companies falling away. And it’s not the ones you think are gonna perform that ultimately do. I think having all of that makes you really humble because it shows you that your ability to predict which managers are gonna be successful is pretty low.

Kasper Wichmann
Sage advice there for those LPs, starting in the asset class, worth listening to.

David Clark
Yeah.

And I would say just as a follow on to that, know, very often we see investors kind of come in and start investing in companies directly first and then doing funds and then maybe thinking about a fund of funds. You know, if I was in that position, I would do that the opposite way. And I don’t want be talking, you know, my own book here, but I would start with a fund of funds. So you get to see that broader perspective, you get access to some historical data and analysis, and you get to talk to people who’ve been in this industry for a long time. And then over time, that should be giving you the confidence to develop your own direct fund investment strategy. And then at a future date, if you want to be doing things direct into companies, then again, that gives you the ability and the confidence to do that, because you’ve built up those relationships with the VCs directly, and you having that understanding of how the VC industry really does offer.

Kasper Wichmann
Dave, I have to ask, in your opinion has the last great venture manager been built?

David Clark
I don’t think so, no. I think it’s getting harder to get into that top tier. But I think what we’ve tended to see is as you get a new wave of technology coming through, then there are certain venture firms that are native to that technology. And have the relationships with that next generation of founders.

And they’re able to get in at the ground floor on some of the best new companies that are coming out of that technology wave. If you look at AI today, there are a few newer managers that are AI specialists that have some really interesting portfolios. The challenge for them is that as AI moves into a different area, are they going to be able to retool as investors? Or are they going to be like the old semiconductor investors that were still investing in chips in 2000 when everybody else had moved on?

So for us, it’s about having that initial sector specialism that allows you to get into good companies, but then understanding when, as the market evolves and the opportunity set evolves, that you need to evolve and retool your skill set in order to continue to take advantage of the opportunities that the market’s coming in. But I think there’ll be undoubtedly some venture firms that are able to do that. And actually, that’s quite exciting.

Because for us as LPs, we found that the time between 2015 and 2021 was quite dull because it was impossible to differentiate between who was really doing things well and who was just being, know, who was, who was just, you know, surfing that, kind of market wave and, had the rising tide lifting everything. It feels like we are in a very different market today where the power law is back and we’re going to see real differentiation between managers. And so the people that really are able to back those top 1 % founders are going to get rewarded and really differentiate their performance from the rest of the market. And as an investor, I find that really exciting because you’re now starting to see much more signal as opposed to all the noise that was just crowding the space a few years ago.

Kasper Wichmann
How do you then identify the emerging manager that is going to be the next star manager out there? You don’t have as much data on them. You don’t. Okay.

David Clark
We don’t. We don’t, we don’t think we can. No, we don’t think we can. And so, you for us, we think the earliest that we would probably partner with a new group would be, I mean, it used to be fund three. I don’t even know if fund three gives us enough signal now, just because funds have been put to work in over shorter periods of time and it takes longer for those winners to emerge. So, you know, it would be around that kind of fund three, fund four.

But we need to see signal from their first fund that it contains one or more top one, potential top 1% companies.

Kasper Wichmann
So waiting for the data. It’s also a good segue into something else you said, which is you don’t think about venture by geography or even sector and only slightly by stage. Again, somewhat contrarian to a lot of VC investors. What’s the logic behind this? Because you also just said, sector specialists can ride a wave of new technology and become the star managers of the future.

David Clark
I think it comes back to understanding where you are within the venture industry and understanding what you’re capable of doing and what you’re not capable of doing. I think even if you talk to a lot of our GPs, they would say they’re not necessarily predicting sectors or industries. What they’re trying to do is to partner with world-class founders. And it’s those founders that are really zeroing in on where the major opportunities are coming from. So I think, you know, take that another level up to the LP side of things. 

And I think it’s impossible for LPs to be able to predict which sector is going to work and which isn’t. Even within AI, should we be investing in model companies? Should we be investing in tools? Should we be investing in AI applications? I think for us, what we found is that the very best managers are able to identify those founders and it allows them to get into the best companies in each successive technology wave.

So if you look and think, you know, who were the best investors in the mobile era? Who were the best investors in the cloud space? Who are now the best investors in AI? It’s the same names. It’s the same names because it’s their ability to identify the very best founders and understand what it takes to build one of these world-class companies. And in a way, the vertical that that company is happening to operate in is probably less relevant than the skill set to build a great business.

Yes, they need to understand what’s happening there. They obviously need to build their skills in that particular sector. But I think it’s more their ability to work with those founders and understand what world-class looks like from inside a business that allows them to help those founders really create great things. And so that’s why we don’t think we can predict sectors and why we don’t like sector specialists.

And what’s interesting, we haven’t invested in an AI specialist manager, yet we have exposure to two thirds of the Forbes top 50 AI startups through our generalists. And if you look at…

Kasper Wichmann
I guess what it does is if you’re trying to pick sectors you’re adding a layer of complexity and risk to your own portfolio construction

David Clark
Yeah, and by the time a sector is obvious to an LP, a lot of the best companies have already been backed. Khosla was the first VC investor in Open AI in 2019? Spark was the first VC investor in Anthropic. Lightspeed was the first VC investor in Mistral in Europe. So time and time and time again, we’re seeing the best generalist investors being able to get in very early.

Kasper Wichmann
That’s a very fair point.

David Clark
in each successive wave of technology. That’s why we recognize we’re not in a position to second guess where they’re going to go. And in a way, the same is true for geography. You know, I don’t really care whether a company is based in Europe or based in India or based in the US or based in Southeast Asia. What we’re finding is that the very best managers can find those companies consistently.

And again, it’s really interesting, if you look at what are the European companies that are on that Forbes AI top 50 list, they’ve all been backed by US managers.

Kasper Wichmann
We’ve great founders in Europe. We arguably have built great companies, but they tend to end up in the US. Is there something wrong or is there something not going right about European VC versus American VC? And if so, what do you think that is?

David Clark
How long have we got Kasper? Again, I can wave my arms around and give you opinions, but at the end of the day, I just go back to the data. And if you look at what percent of exit value comes from European companies versus US companies, it’s about 80-20. And so 80 % coming from the US, 20% coming from Europe. And if you look at what percent of the biggest exits, it’s even more stark. However you like to cut it, it’s very clear that most of the biggest exits are coming from companies that are in the US. And that might be a company that starts in Europe and relocates to the US. That’s how Pitchbook, you know, they look at it by the HQ, where the HQ is at the time of exit. So, I’m not saying that all of those companies start in the US. But I think it’s just clear that it is easier to build great businesses out of the US than it is out of Europe. Again, not to say you can’t build great businesses out of Europe, because I think we’re seeing some, and there’s some incredible founders, but I think they’re more the exception than the rule at the minute.

Kasper Wichmann
I have to ask you if you could change one thing in the European VC ecosystem then what would you change?

David Clark
I don’t think there are any silver bullets like that, Kasper. I mean, you’re a founder, you’re an entrepreneur, your company’s based in Denmark. You’re having to deal with all the myriads of regulation and hiring there’s just so much stuff in Europe that makes it harder, I think.

Kasper Wichmann
Got the gray hair to prove it

David Clark
And then you’re also looking at the size of the market. And I think there’s a cultural aspect as well around building world-class businesses in Europe. So I think there’s lots of things. I think there are people who are way better qualified than I am to kind of identify what Europe needs to do in order to be competitive. But I think you need to have the political will in order to do some of those things. And while in the UK and the Europe, politicians are talking a good game, I’ve yet to see it really backed up by meaningful action.

Kasper Wichmann
Moving on to a lighter subject. Most VC’s and most VC investors talk about unicorns. You don’t really talk about unicorns, you talk about fund returners. Why is that?

David Clark
Because we, again, we go back to the data and what the data tells us is that fund returners are more predictive of performance than unicorns. The idea of this top 1% companies is what we really focus on. And we did some analysis a while ago around what’s the size of a top 1 % exit. And over the last five years, a top 1 % exit in the US was about a $10 billion exit or higher. So that was the kind of cutoff for a top 1 % exit. So you’re talking about a decacorn. And what’s been interesting is that the size of those top 1 % exits double roughly every five years. So it was $10.2 billion between 2020 and 24. For the five years before that, it was 5.8. For the five years before that, it was 2.7. And for the five years before that, it was 1.4.

So, for us, unicorns were relevant back in 2005 to 2009. Today, if you really want to move the needle on the venture industry, you need to be generating an exit that’s $10 billion or higher. And there’s only a handful of companies that can do that. But what’s interesting is even in the last couple of weeks, we’ve seen a number of those.

We saw earlier this year Wiz’s potential acquisition by Google for 32 billion. We saw Circle go public. We’ve seen Chime go public. We saw Facebook buy half of OpenAI for $13 billion. Figma’s lining up to go public now. It looks like the valuation there is probably going to be $20 billion plus, hopefully. So, we are seeing these exits happen. And for us, that’s what we want to focus on. It’s those types of exits. Now, today, a billion dollar company, it’s really a tuck in acquisition for one of the large players.

Kasper Wichmann
You heard it here. Dave, going back to VENCAP, you’ve built a focused, highly selective type of operation. What’s the internal edge at VENCAP in terms of sourcing, decision making? How do you engage with the managers? How do you gain access to these often completely oversubscribed and closed managers? Because that is arguably what a lot of LPs would like to do, but struggle to do. What’s the secret here?

David Clark
I don’t think there’s anything earth-shattering that we’re doing that nobody else could do. I think the one thing that we do have that I really do feel is a competitive advantage is our data set. So we’ve invested in over 500 VC funds. We’ve got a database of over 22,000 portfolio companies stretching back to the 1980s.

So we’ve got a really broad longitudinal data set, which really helps us understand, what are the drivers of venture performance? Where are the areas we want to kind of dive into? What are the things we want to avoid? What are the characteristics we want to see in terms of portfolio construction, loss rates, the willingness to really focus on the power low outcomes and are people willing to take enough risk in order to achieve those fund returning exits. It’s all those things that I think that our data informs. And then we use that to try and help the managers we back. We spend a lot of time with them showing particularly, an interesting example is obviously a lot of those managers have raised growth funds over the last decade or so. We were able to say, look, this is what a world-class growth fund looks like in terms of what percent of money goes into companies that ultimately don’t return capital? What do you need to do in terms of 10X outcomes? What does it mean in terms of the number versus the cost in each of those different segments? So how are you thinking about allocating your follow-ons? And so all of that sort of stuff allows us to have a really informed discussion around portfolio construction and investment strategy that I think is helping them sort of understand the level of risk they need to take and then how they compare to their peers. Because that’s the other thing that we’ll do is we’ll say, like, this is what our whole data set tells us and this is what you’re coming up. So, you know, if you have a significantly lower loss ratio than your peers, but a significantly lower proportion of fund returners, you know, is that telling you that you’re actually not taking enough risk? So it’s those sort of conversations that I think allow us to hopefully add some value. But I think we’re also realistic. At the end of the day, there’s a limited amount that we can do to help our VCs. The best thing we can do is get out of their way and make sure they’re spending the vast majority of their time with founders and with their portfolio companies. We have a fiduciary responsibility to our investors to make sure we’re doing our job. So we do need to spend a little bit of time with them, but we’re to be really focused on what are the key issues and what are the things we need to focus on.

So I think that’s a big part of it. And then, we’ve been doing this for a long time. We’re patient. We don’t have to back every great manager that’s out there. We just have to make sure we’re backing great managers. So one of the other things we do is to make sure that our programs are sized according to the capital that we can commit to our dozen or so core managers over a three-year period.

So while our fundraising guys would love us to be able to go out and say we’re raising a billion dollars, because it’s probably easier for them, I know I can’t commit a billion dollars to our core managers over a three year period. And so you see a lot of fund of funds have scaled their AUM aggressively. And personally, I think that’s going to impact performance. We’ve taken a very clear view on the primary side that we want to stay very focused and we’ll only raise as much as we can allocate to those managers over a three year period.

Kasper Wichmann
This is a nice segue to the next point because venture is capital constrained. It’s not flowing with money anymore. How has this shift impacted fund quality? Has it changed manager behavior? And how has it impacted your own deployment strategy within VenCap

David Clark
You see, I push back on that, Kasper. I think there’s plenty of money in the industry for the very best founders. So if you’re a top 1 % founder, there is no shortage of capital. In fact, you’ve got investors beating on your door wanting to give you money. If you’re one of the leading AI companies out there, there is no shortage of capital, either at the seed stage, the early stage, or the growth stage. And that’s true whether you’re in the US, whether you’re in Europe, or whether you’re in the UK.

Kasper Wichmann
Okay.

David Clark
So I think this myth that there’s a lack of capital out there is exactly that. It feels like, for me, it’s a myth. There’s definitely less capital than there was five years ago. And that’s a good thing because there was just way too much money coming into the ecosystem in that period. Too many marginal companies being founded, too many marginal VCs being funded. And I think that just ultimately leads to poor performance for the entire industry.

So I would much rather see capital being relatively scarce. And I think it’s Chris Douvos who says that venture works best when capital is scarce and time is plentiful. And I totally subscribe to that. So I think for us, we’re just reverting to the mean in terms of the capital that’s out there in the market today. And it should be hard to raise a fund and it should be hard to raise money as a company. And it should be only the very best that can do that consistently.

Kasper Wichmann
You’ve also said the long-term opportunity in venture is growing from GDP shift to tech penetration. What do you mean by that?

David Clark
I think the best way to sort of think about it is, you know, when I started in this industry, it was a bit of semiconductor, a bit of networking, a bit of biotech, a really small kind of cottage industry around Silicon Valley and just outside of Boston. Today, technology is impacting just about every business. If you are not using AI in your business today, you’re not going to be successful. And so the opportunity set for venture has got much broader in terms of the sectors that technology can impact. But it’s not just about going broader, it’s also going much deeper now. And so you have this idea of the full stack startup. 

And the best way I can kind of describe this is, initially with mobile, you had companies that were selling software to taxi firms. And then you had Uber. Selling software to taxi firms was a really small market. Uber wasn’t selling software at taxi firms. They became the taxi firm. They were vertically integrated across the full stack. And I think that’s what we’re ultimately seeing more and more of within venture. So rather than just capturing a small slice of the value with any one market, the leading companies are capturing a much bigger slice of that economic pie in those markets. And that’s why I think ultimately the outcomes for those top 1 % companies are going to continue to get bigger because the markets that they’re addressing are going to get bigger and they’re going to capture more of the economic value that those markets create.

Kasper Wichmann
That’s where the opportunities are. Where are the risks then? What keeps you up at night in venture?

David Clark
One of the downsides about being in this industry so long is that you’ve lived through some major corrections and we know that that happens. And so, it always makes me nervous when money is flooding into a particular area. We’re seeing it in AI at the minute. I think it’s really clear that there are going to be some incredible companies that come out of this initial wave of AI investment.

But there’s also going to be a lot of money that ultimately gets burned. And particularly when companies are raising large amounts of money at high valuations. I think we saw, with SoftBank’s investment strategy, more capital is generally not the answer when it comes to producing better outcomes in venture. If anything, less capital is possibly a better answer. There are certain areas where clearly if you’re Open AI or Anthropic, then you need to have that capital there in order to build out your infrastructure. But I think for a lot of businesses, being able to do things on less capital is really important. And so that concerns me that there’s just too much money coming in and that will impact the return that comes from even the best companies.

But I still think there’ll be some incredible businesses that I’ve built over this period. The other thing that kind of keeps me up at night is that I’m paranoid that we’ve got it wrong in terms of our approach. I’m absolutely paranoid that maybe we should be investing in seed funds and emerging managers and European deep tech firms. And that actually what we’re looking at is the rearview mirror and looking at the front wind screen it’s a totally different landscape. I don’t think it is. But what that means is every time there’s a new bit of analysis or a new bit of data, as a group, we’re pouring over all of that to really understand, is this contradicting our strategy? And if anything, we probably look for stuff that contradicts how we view the industry more than we look for things that support it. Because we know there’s plenty of data that supports that. I want to find that outlier that might be the predictor that things are changing. So that’s probably internally the thing that kind of really keeps us awake at night. It’s that paranoia about is the future going to resemble the past?

Kasper Wichmann
I think it’s probably a very healthy approach, but I think it’s also very rare amongst investment professionals. We tend not to want to open that door too often necessarily.

David Clark
Yeah, I think it’s interesting. I look at our job is to try and generate consistent top quartile performance for our investors out of the venture industry. And really, I am ambivalent as to how we do that. It’s about trying to find the best way to do that consistently. I think we’ve done that for the last 10 to 15 years. I’m hoping and the evidence tells us that what we’re seeing is that those things are still true. When you look at the big exits we’ve seen over the last six months, we’re fortunate enough to have good exposure to the vast majority of them. So that’s telling us that things haven’t changed. But that’s no guarantee that things aren’t going to change in the future. And so I think having that paranoia and to say, yes, we’ve done well, but we’re only as good as our next investment, not our last one.

Kasper Wichmann
We are almost out of time Dave, but we have time for a quick fire round if you’re up for it. One myth about VC that you’d like to see die.

David Clark
Yep, go for it.

Only small funds outperform and you can’t get fund returners on a billion dollar fund. You should optimize for quality not fund size.

Kasper Wichmann
What’s more dangerous to an LP, ego or optimism?

David Clark
Ego.

Kasper Wichmann
And top tier access, is this something you earn over time or is it that some would argue already priced into the market?

David Clark
A bit of both. Ultimately you have to earn it over time and you have to maintain it as well.

Kasper Wichmann
Dave, we’re going to stop here. This was really insightful. We went through performance power law, who can consistently back the winning 30 companies, the importance of fund relations, the need to be able to invest through cycles that you shouldn’t invest in median and funds that return 1.7x, that technology can be a reset for the managers and the great managers, that the best managers consistently pick the best founders, and that’s where the trick is. That unicorns are not predictable.

I personally like that a lot because I’m very, tired of that specific label. And that at a top 1 % exit today is an astounding $10 billion. It’s been an absolute master class in venture capital. Thank you very much for joining us, Dave.

David Clark
Kasper, it’s been fun. Thank you so much for having me.

Kasper Wichmann
For our listeners, if you want to know more about VenCap you’ll find them on Orca and can contact them there. For those who want more of Dave’s sharp insights, do follow him on LinkedIn.

Kasper Wichmann
Thank you also to our listeners for tuning in to Balentic Edge. I hope you enjoyed the conversation. If you did, please hit follow on Spotify or Apple, or subscribe on YouTube. And consider sharing this episode with a friend or a colleague. Do you have feedback or questions? I’d love to hear from you. Connect with me on LinkedIn. This episode was brought to you by Orca, helping GPs reach the right LPs and LPs discover the right funds. Learn more at balentic.com/orca Thanks again for listening, and until next time, stay illiquid.

Kasper Wichmann
Finally, a small disclaimer. The views expressed in this podcast are solely those of the host and guests and are provided for informational purposes only. They do not represent the views of any affiliated organizations, employers or entities. Nothing discussed should be construed as investment, legal, tax or business advice. Any reference to specific funds, companies or investment strategies are purely illustrative and do not constitute an offer, solicitation or recommendation to buy or sell any security or financial instrument. Listeners should consult their own professional advisors before making any investment or financial decisions.