E286: How LPs Can Actually Find Alpha in Venture

Abe, consulting researcher at AngelList, shares insights gleaned from analyzing venture capital data. He discusses how seed investing differs from Series A/B rounds due to power-law returns, where making more investments leads to higher average returns because of the unbounded opportunity cost of missing the next big investment. Abe highlights the significance of having access to price-per-share data to accurately assess high performers and avoid skewed advice. He also addresses adverse selection, noting that small checks often outperform big checks because better investors may squeeze down participation in hot rounds. Strawberry Tree Management Company, where Abe is CIO, uses quantitative signals to identify promising GPs, aiming for above-average returns by investing in a broad range of funds.