Thank you for this thorough deep dive, I will share it with people in my network.
Two things where I'm still not convinced, after reading it -
"Small" improvement in deal flow generates better outcomes than "big" improvement in "picking" skills.
Even from the math equation you have provided, it seems both are equally important.
I do agree it is often less talked about.
And, in general, I do feel "origination" deserves more space and attention.
Second thing, based on what criteria was this concluded: "Most likely - they land somewhere in the middle, and end up without much measurable influence on venture capital outcomes. At the early stage, the greatest outliers will still be more easily identified by investors with a unique thesis, reflected in how they approach origination."?
Once again, thank you for the article, a good read indeed.
Thanks for the comment, Nastja! Happy to go a bit deeper on those questions.
1) A simple way to think about this is that improving the quality of your deal flow should also (assuming some skill in picking) improve the quality of the companies you end up picking. On the other hand, improving your picking skill doesn't improve the quality of your dealflow (what you can pick from). So one compounds both ways, the other doesn't.
2) Based on the logic that all "obvious" strategies become saturated and so alpha can only really be generated by the non-obvious strategies. Implicitly, AI platforms can never be a total solution to VC sourcing and selection. In the short term, there may be an edge for some firms who are early adopters, though this will likely erode over time.
Thank you for this thorough deep dive, I will share it with people in my network.
Two things where I'm still not convinced, after reading it -
"Small" improvement in deal flow generates better outcomes than "big" improvement in "picking" skills.
Even from the math equation you have provided, it seems both are equally important.
I do agree it is often less talked about.
And, in general, I do feel "origination" deserves more space and attention.
Second thing, based on what criteria was this concluded: "Most likely - they land somewhere in the middle, and end up without much measurable influence on venture capital outcomes. At the early stage, the greatest outliers will still be more easily identified by investors with a unique thesis, reflected in how they approach origination."?
Once again, thank you for the article, a good read indeed.
Thanks for the comment, Nastja! Happy to go a bit deeper on those questions.
1) A simple way to think about this is that improving the quality of your deal flow should also (assuming some skill in picking) improve the quality of the companies you end up picking. On the other hand, improving your picking skill doesn't improve the quality of your dealflow (what you can pick from). So one compounds both ways, the other doesn't.
2) Based on the logic that all "obvious" strategies become saturated and so alpha can only really be generated by the non-obvious strategies. Implicitly, AI platforms can never be a total solution to VC sourcing and selection. In the short term, there may be an edge for some firms who are early adopters, though this will likely erode over time.
Thank you for your answer.
A good article to start discussions. :)