Episode summary
The Biggest Mistake Investors Make When Building a Venture Portfolio
How I Invest With David Weisburd
· · Hosts: David Weisburd · Guests: Michael P. Larsen
Summary
Michael P. Larsen argues that longevity is a real edge in venture and private markets because it gives LPs patience, perspective, and enough “game film” to see which decisions age well. He says Cambridge Associates’ open GP meetings and long manager history let him observe thousands of discussions, which is why he thinks durable portfolios come from staying in place long enough to judge outcomes, not just make recommendations.
He draws a sharp line between venture and private equity: venture is driven by power laws, so portfolio construction matters as much as manager selection. In his view, elite family offices often win by having a larger venture and private growth footprint, and by using governance to stick to a plan through changing markets and liquidity pressures. He emphasizes that expectations, cadence, and re-underwriting matter because fund pacing can compress from three years to two or less.
Larsen also says benchmarking is especially tricky now because public markets have outperformed venture on a short rolling basis, even though long-run venture still tends to win. He highlights growth equity as an overlooked “third bowl of porridge,” and says co-investing works best when LPs have scale, a clear strike zone, and enough manager underwriting experience to avoid adverse selection.
Key takeaways
- Michael P. Larsen says longevity is a superpower in asset management because it gives LPs the patience and perspective to see how decisions actually age.
- Larsen argues that in venture, portfolio size can matter as much as manager selection; he cites 40% private growth exposure as potentially outperforming 30% with better selection.
- He says governance is a quiet but critical advantage because LPs need the discipline to make a plan and stick with it through market stress.
- Larsen says elite venture portfolios should expect spiky outcomes, because power-law returns make some funds winners and others flat or down.
- He says benchmarking should focus on whether liquidity is being rewarded and whether manager selection beats the median, especially during MAG 7-distorted periods.
- On co-investing, Larsen says adverse selection is a major risk and that scale plus deep manager underwriting improve access and selection quality.
Notable quotes
“longevity in the role is really the superpower that longevity gives you the patience. It gives you the perspective that are are required for success”
“Venture capital is a completely different animal. It behaves differently. to your point on power law it the results are dramatically different”
“the size is just as as as determinant of success as the as you know the selection behind it”
“the best performing pools institutional or family office have in common is probably the least sexy thing, but it is governance”
“I would say it's the most one of the more optically challenging times to be an LP in venture land where you have to justify its role in the portfolio”
How the episode opens
You've spent nearly two decades at Cambridge Associates really building portfolios for some of the top institutional investors and family offices in the world. How has that experience shaped how you look at asset management today? I think that longevity in the role is really the superpower that longevity gives you the patience.
It gives you the perspective that are are required for success. And when I think about the decisions that I've made on behalf of clients uh in terms of recommendations or investment action over the last three years, I have no idea yet how those decisions will age. But I have a lot more clarity on how those decisions I made back in 2010, 111, 12 have behaved.
And I think it's important that you remain in place to see the the fruits of of those decisions. I think that, you know, culturally too, we're a very open-source firm. Every GP meeting we have at Cambridge Associates is an open meeting.
And so, in 19 years and change, I've sat in on about 5,000 manager meetings. So, a year at CA in this seat is a dog year at a typical endowment office or or found or or family office. And so the amount of game film of understanding what works and what doesn't is very formative to to how we look at things.
Ultimately, you have to have longevity. And I think it's it's perilous to to to to move on quickly and not see through the decisions you're making to to their their eventual outcomes.
Venture capital is idiosyncratic in how you create a portfolio versus other asset classes because most asset classes, they're not subject to the power loss. A good investment is a good investment is a good investment. In venture capital, a lot of it is about putting the right parts that together make a great portfolio.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture portfolio construction
- venture governance
- lp longevity
- allocation size
- venture co-investing
Companies and tickers mentioned
- Cambridge Associates
Watch the episode
Watch “The Biggest Mistake Investors Make When Building a Venture Portfolio” 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.
