Kwame Dubois

Thinking that ticket size is the only factor to consider forgets that, historically, a fund's ability to generate exceptional returns does not depend solely on its structure. Remember that a fund with small tickets but a strong ability to attract disruptive companies, as Sequoia Capital did with Apple or Google in their early days, is much more effective than a fund with large tickets but low attraction power.

The idea that modeling variable ticket sizes in venture capital simulations directly realizes the impact of portfolio size on risk and return is an oversimplification. Historical data shows that the complexity of real factors is rarely fully captured by such simulations. Merely modeling variable ticket sizes does not guarantee that results faithfully reflect the risk and return dynamics of a real portfolio. For example, market liquidity or economic cycles, crucial for performance, are often omitted or simplified, making the capacity to "realize" reality highly conditional.

Forget what we have already invested in this notion: the statistical similarity revealed by Kolmogorov-Smirnov tests does not constitute sufficient proof of operational similarity.
A KS test could show a very similar distribution of returns between a venture capital portfolio and a random benchmark, but this does not validate management decisions or the absence of specific risks.
For example, factors like multiples of empirical venture capital portfolios or limitations of benchmarks could mask underlying dynamics not captured by distributional conformity alone.
We must always look with fresh eyes if the interpretation of a statistical model overlooks local constraints or operational uncertainties.
A similar distribution does not mean identical market mechanisms; a RBI policy on liquidity, for example, can drastically alter economic reality despite a statistical match of returns.