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The interplay between beta, alpha, access, capital and brand in the venture investing game makes this easily one of the most fascinating asset classes ever. (a thread)
If you are an insider, the beta in venture is just insane. As a result of a multi-decade technology trend, we are all printing money. I have had 30+% IRR every year for six years now and I am just not that good. Any idiot with a checkbook in this business looks like a genius
Alpha is even more fascinating. The skill aspect is so pronounced the best venture investors are able to reliably and repeatedly create 10s of billions in value from zero. Its a multi-dimensional chess game, the best players have a huge delta. But, it takes years to show up.
One of the most intriguing aspects of the game is you need to be invited to play. You can't simply show up at the stock market, analyze and buy. Value add, brand, interpersonal skills and relationships all interweave to create a unique playing field for each practitioner.
Since alpha takes years to prove, and the returns are massive, those with it are so deluged with capital they quickly confront alpha destroying Faustian Bargains if they want to deploy it. The siren call of scale sucks many to inferior returns, but with high beta they still win.
And encapsulating the whole thing is brand. Without a brand you get no access, no capital, no chance to prove alpha and sadly no beta... :(
Such an interesting game we play.
Such an interesting game we play.
