Sam

Been spending a lot of time looking at early stage funds. A few observations: 1) Trad VC returns fucking suck - I kind of knew this already, but actually looking at typical TVPI/DPI numbers and time to liquidity for trad VC funds has really crystallised for me how blessed crypto VC is as an asset class. For Delphi and other top crypto funds, our DPIs and time to liquidity are simply unparalleled even compared to the top performing trad VC funds. Makes it hard to get excited about them 2) Lack of concentration - A lot of managers are aiming to 2-3x the fund and this lack of ambition shows through all their decisions. Perhaps the biggest mistake I see is lack of concentration. Many funds are aiming to do 40-50 tickets per fund, which makes outperformance practically impossible. Much more interested in funds doing 10-20 tickets and doubling down on winners. Concentration is a forcing function on the right kind of behaviours. It forces conviction rather than simply seeing every investment as a call option. It forces you to care about the founder and actually work hard to help them succeed. It forces you to actually build a differentiated deal pipeline, rather than simply following on with a tiny ticket on the latest hot round. It’s also a filtering mechanism for managers who really believe in themselves and their alpha, vs those who just want indexed sector performance Ultimately, there simply aren’t that many important companies started every year, and when you account for the repeat/pedigreed founders that will instantly get funded by Big VC, it’s an even smaller number that the smaller funds will have access to. Better to focus energies on finding these gems and betting big when you do Concentration is imo even more important in trad VC than crypto VC, because of the much lower % of investments that ever get to a liquidity event. This bimodal distribution means the winners must be big enough to compensate for a lot of zeros, unlike in crypto where there’s a much bigger spectrum of outcomes as even a “loser” may result in some DPI 3) Massive potential - all this being said, there are a few insanely talented early stage managers out there, who I’m pretty confident can deliver 10-100x funds. These guys are crazily well-networked, hungry, smart and show a proven ability to get into coveted deals before the big funds come in. Their smaller size means: a) they can move quicker and commit faster b) they benefit from the capital efficiency of AI which means founders don’t need to raise as much to ship products c) they also benefit from the oversupply of capital at later stages that competes to price up their winners d) smaller size makes it easier to exit on increasingly liquid secondary markets vs waiting for sale/IPO Overall, it’s been very fun and inspiring to speak to so many young investors. Learning a lot and extremely excited to help these guys succeed