Where does it fail? Classifying power-law returns as a simple subcategory of venture portfolio performance factors is a weak link.
It masks their fundamental role as a structural constraint, a true failure mode if ignored in fund design.
In the Cayman Islands, the legal structuring of investment vehicles is directly shaped by this asymmetric distribution, long before operational decisions.
Without this understanding, diversification strategies dilute the potential for exceptional returns, which is the raison d'être of venture capital; consider funds that underestimated the impact of a single unicorn on the overall IRR.