Asher Siddiqui

13 things LPs should know about venture capital. 1/ VC is highly cyclical, alternating between long risk-on periods followed by sudden risk-off periods. Trying to time things is a fools errand, which is why consistency across vintages is required. 2)75-90% of VC funds (depending on the cycle) will underperform top quartile lower middle-market PE funds, especially when accounting for illiquidity/risk. 3)Most LPs would achieve better returns investing in established large/mid-cap tier-1 brands rather than trying to pick individual micro funds. The latter requires expertise and TIME 4) Small seed funds consistently make up the majority of the top 10% and bottom 10% of funds in every vintage year. 5)While DPI (Distributions to Paid-In) ultimately matters most, avoid drawing conclusions from funds <6 years old. Our data shows that some top-performing funds actually took longer to achieve their first meaningful DPI. The Carta and AngelList data is valuable, but being surprised by lack of DPI for 2020+ vintage years shows little understanding of the asset class. Also 2017/2018 DPI is indeed poor, but this reflects the challenging exit markets of 2022-2023. Focus on company quality and wait to judge. 6) Recent posts suggesting that $100M-$500M funds are in "no man's land" are both incorrect and correct at the same time. This applies to firms lacking advantages in brand, domain expertise, or network. There's significant value for founders raising Series A from high-quality mid-cap managers who can provide quality senior partner support. 7) While track records and historical performance provide useful context, in VC, backward-looking analysis almost always leads to suboptimal deployment decisions. 8) A recent LI post citing PitchBook benchmarks claimed 11% of sub-$100M funds achieve 5x returns. This is significantly overstated due to survivorship bias and using small samples as a denominator. The figure is closer to ~1-2%. Funds achieving 5x+ DPI are truly rare. 9) VC faces a significant liquidity challenge and needs to mature in developing better liquidity paths. Extended liquidity timelines are increasingly incompatible with viable risk-returns, especially for those who cannot access top managers. 10) Thea ability gap between top and mediocre/poor VCs is enormous and becomes readily apparent to LPs with sufficient experience. However, since VC often represents only 5-10% of an LP's portfolio, many lack the sample size or network access for proper comparison. 11) Track record assessment requires careful analysis of holding values. Managers' holding valuations can inversely correlate with the firm's fundraising risk. I've seen firms that don't worry much about being able to raise typically maintain more conservative valuation policies. LPs must scrutinize the marks of top portfolio companies driving past unrealized performance. 12) For seed funds having a real edge in sourcing & winning deals can> picking ability. Brand/distribution matter. 13/ Every decade, there is a new guard of firms that come in and become dominant long term forces. 2000's, 2010's saw it, and we are already seeing early signs of breakout new firms in the 2020's. There are far more things.