Origins - Inside Venture Capital, Hosted by a GP and an LP · OpenLP from Sapphire Partners

Revisiting Power Law VC Performance with David Clark

·56 min·3 clips

David Clark says more than 50% of VC investments do not return capital, while 25 to 30 companies drive over half of global exit value each year.

1. Origins - Inside Venture Capital revisits David Clark's discussion of power law VC performance and LP selection. 2. Beezer Clarkson co-hosts with Nick, and David Clark appears as CIO of Vencap International, where he has backed venture funds across the U.S., Europe, China, and India. 3. The episode asks whether LPs should prioritize established managers, emerging managers, or a mix, and David frames the answer with data from Vencap's portfolio. 4. David says Vencap was founded in 1987, has made more than 400 commitments, and shifted strategy after spending 20 years trying to pick managers. 5. He says that by the late 2000s the firm realized it was not very good at choosing managers and turned to a deeper analysis of fund and company outcomes. 6. That analysis covered more than 100 VC funds and roughly 15,000 to 16,000 portfolio companies, giving Vencap a long-horizon view of returns. 7. David says more than 50% of VC investments do not return capital, and that pattern has held for about 30 years. 8. He also says 25 to 30 companies each year account for more than half of the global exit value generated by the VC industry. 9. The discussion centers on the idea that venture is a power law market where a few companies drive most of the returns. 10. Beezer and Nick push on how that power law differs for small emerging funds versus large established ones. 11. Nick says Notation's smaller funds do not need the same massive outcomes as large established firms, and that their loss ratio math can still work. 12. David responds that Vencap's mature core manager funds have generated about 3.5x to 4x on an aggregate basis over the last 25 to 30 years. 13. He says Vencap mostly backs established managers, usually starting at fund three rather than fund one. 14. He also says early-stage for his program means series A, not seed, and that he can count on one hand the number of sub-$100 million funds backed in the last 10 to 15 years. 15. David argues that predictability matters more than a theory about emerging manager outperformance, because Vencap failed for 20 years when it tried to identify new managers. 16. He says the strongest signal is whether a manager has already produced a company that can return the fund, and that many fund-returning companies show up by fund three. 17. The tone is analytical and data-heavy, with Beezer and Nick pressing David on TVPI, DPI, and how LPs should think about benchmark data. 18. The format is a three-way interview with pointed questions, long answers, and repeated cross-checking of assumptions about venture returns. 19. Listeners who like LP strategy, venture fund math, and manager selection will get the most from this conversation. 20. Listeners looking for founder stories, quick entertainment, or simple venture jargon may skip it.

As heard by us

A disciplined, data-backed venture conversation about how strong managers and companies get chosen.

This episode has real weight because it stays with David Clark, CIO of Vencap International, and lets nearly 30 years of venture study do the work.

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Why you'd press play

You want a sharper read on how venture managers get picked over the long haul.

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