Episode summary
$70 Billion LP on Venture Capital, Compounding, and Manager Selection
How I Invest With David Weisburd
· · 37 min · Hosts: David Weisburd · Guests: Jeff Diehl
Summary
Jeff Diehl argues that venture investing is mostly about access and patience, not prediction. The most important edge, he says, is getting into top quartile managers and investing over time so you have time diversification. He frames venture as a “reverse asset class” where founders choose the best GPs, and managers with the strongest track records and relationships become access constrained.
Diehl says Adams Street’s roughly 14,000 realized venture exits show how power-law the asset class is: the top 7% of companies generated 100% of net gains, while about half of realized deals did not even return invested capital. That leads him to favor early-stage managers, basket-style construction, and structures that avoid exposure to a few zeros. He also uses co-investments and secondaries to increase exposure once breakout winners are visible.
He is bullish on private markets more broadly. Diehl argues that more growth is now happening privately, public markets are less hospitable for sub-$10 billion companies, and capital will keep migrating where returns are highest. He also stresses that long-term performance depends on culture, governance, and incentives, especially in a 100% employee-owned firm with shared economics and disciplined succession planning.
Key takeaways
- Jeff Diehl says the single most important venture skill is getting access to top quartile managers, then investing consistently over time.
- Adams Street’s data suggests the top 7% of venture-backed companies produced 100% of net gains, according to Diehl.
- Diehl expects portfolio construction and time diversification to matter more than single-stock selection in venture.
- He uses co-investments and secondaries to add exposure to breakout companies once traction is proven.
- Diehl says private markets are capturing more growth because public markets are less attractive for smaller companies.
- He argues employee ownership and shared incentives help Adams Street manage succession and keep client interests first.
Notable quotes
“The most important thing you can do in venture is access top quartile managers”
“Both dispersion of returns and persistence of returns are higher than any other asset class in the world”
“our data shows that the top 7% of companies, sorted by money multiple on cost, have produced 100% of the net gains for our investors”
“Portfolio construction is super important in in venture capital”
How the episode opens
What's really unique about this time is the big next wave of magnificent seven are all well known and massive value creation has accrued to the private shareholders rather than public shareholders. It's become a little bit more apparent to people which companies seem to be really breaking out. Clearly it did decades ago even back in the dot com bubble.
So Jeff you're managing partner at Adams Street Partners which has 70 billion dollars AUM. And last time we talked you said that you always say one very important thing to anyone looking to invest in venture. What is that?
The most important thing you can do in venture is access top quartile managers. And then there's a sub point to that which is make sure you invest over time and get good time diversification. If you do those two things well, you're going to be in really good shape.
And we were talking about this right before you pressed record. This is the Professor Steve Kaplan the persistence of venture capital which is if you invest in the top quartile funds over last 40 50 years highest amount of persistence in venture capital than any other asset class in the world.
Both dispersion of returns and persistence of returns are higher than any other asset class in the world. Very very very unique asset class. — Give me some numbers on that. — The statistics would show in venture capital that if you've produced a top quartile return the chances that you're going to produce another top top quartile fund or a top half fund range in the close to 50% and close to 85% probability. So lots of stickiness to this and that makes sense. Entrepreneurs who start companies want to work with the best people who can help them build value the most.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital manager selection
- venture returns persistence
- venture portfolio construction
- co-investments and secondaries
- private markets concentration
Companies and tickers mentioned
- Adams Street Partners
Watch the episode
Watch “$70 Billion LP on Venture Capital, Compounding, and Manager Selection” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
