Episode summary
Can You Index Venture Capital?
Swimming With Allocators
· · 46 min · Hosts: Alexa Binns, Earnest Sweat · Guests: Alex Kirk, Shane Goudey
Summary
Alex Kirk describes Verdis’s early-stage venture program as an index-like answer to seed’s power-law structure: rather than concentrating in a few brand-name funds, the team seeks broad exposure across pre-seed and seed, often through sub-$50 million, fund-one and emerging managers. The goal is to own the distribution of outcomes, since the biggest winners drive most of the return and the public markets already solve that problem for investors in a way seed does not.
He says the strategy grew out of his endowment-style background, but venture required a different framework because early-stage returns are less predictable than most private asset classes. Verdis covers about 20 to 25% of all US seed-stage companies, with a commitment roughly every month, and has built a large data set from more than 4,000 companies, 70 funds, and 45 GP relationships since 2017.
Kirk emphasizes process over track record. He prefers generalist managers, wants to avoid pattern-matching bias, and underwrites how GPs source, construct portfolios, and deploy capital. He also argues that fund ones can be especially attractive because the balance of luck and skill is most favorable early in a manager’s life, while the firm’s job is to stay anchored to the earliest possible entry point as pre-seed and seed increasingly blur.
Key takeaways
- Verdis is built to mimic an index in seed, seeking broad exposure to outliers rather than betting on a small number of brand-name managers.
- Kirk says the firm covers about 20 to 25% of all US seed-stage companies and makes roughly one fund commitment per month.
- He prefers fund-one and emerging managers because the luck-to-skill mix is most attractive early in a GP’s life cycle.
- Kirk says process matters more than prior returns, especially portfolio construction, sourcing, and deployment discipline.
- He favors generalist venture strategies because they avoid sector bets and let the portfolio cap-weight itself toward where the market is moving.
Notable quotes
“You can buy the whole distribution for a few basis points, which means you own every outlier by construction”
“And the same concept didn't really exist for seed stage, so we decided to build it ourselves”
“our strategy covers about 20 to 25% of all the seed stage companies in the US”
“And we spend a lot of time with GPs, often fund ones, uh that's a an entry point”
“we're trying to avoid rigid pattern matching. And there's a natural tendency in investing to pattern match”
How the episode opens
The public markets solves the power law problem. You can buy the whole distribution for a few basis points, which means you own every outlier by construction. And the same concept didn't really exist for seed stage, so we decided to build it ourselves.
Welcome to Swimming with Alligators. — The VC podcast from the LP perspective. — With your host, Alexa Binns. — And Earnest Sweat. You ready? Let's dive in. Our next guest is Alex Kirk. He is vice president of Verdis, and I have been so pumped to have you on the show, Alex. As fund of funds go, this is the most differentiated approach I have seen out there, and I'm so excited to hear about what you're doing.
Thank you. Um, it's great to be great to be on with you guys. — Absolutely. Um, before we jump into Verdis and what you all your approach, this sort of quant uh, approach to selecting managers, could we get the Alex Alligator story?
Sure. So, I started my institutional investing career um, about 10 years ago in the classic asset allocation driven endowment style model. So, allocating to managers across all the alternative asset classes.
And when we started, we had a a public markets book so that I was covering, which was split between an equity strategy and a hedge fund portfolio. And the other side of the book was a large allocation to private markets, and that included buyout, growth equity, venture, real estate, and natural resources. Um, and what I what I really liked about this approach was one, seeing everything that was out there, but two, uh, building strategies for each asset class, and um, you know, building that into a portfolio with an extremely long time horizon.
Um, and so, what I like about this was that that really allowed us to optimize for time, um which is a it's a big controllable component in compounding capital.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital indexing
- pre-seed and seed investing
- fund-one managers
- ai-driven market shifts
- venture fund formation
Companies and tickers mentioned
- Verdis Investment Management, LLC
- Sidley Austin LLP
Watch the episode
Watch “Can You Index Venture Capital?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Swimming With Allocators
Swimming With Allocators, this episode and its artwork belong to Earnest Sweat, Alexa Binns. Octagon is not affiliated with the show; this page is an independent summary.
