Friday, April 15

Correlation Ventures

I am a bit behind on my journal following a week on the road with David, who continues to raise capital for his firm, Correlation Ventures. Here we are, on a train, from Geneva to the airport.

Our week takes us from London to Amsterdam/ Rotterdam/ The Hague to Copenhagen then Switzerland and back to London to visit some family friends and institutions, who, despite a strong expressed interest in a quant-driven venture strategy, are unable to rise above themselves to support the partnership. Venture capital is a tough sell and a first-time fund with a unique approach almost, well, impossible. Despite this, we now have $50 million of commitments including three US endowments which are considered "prestige" and usually come in to well-established funds.

David's presentation nimble with enough geek to impress the statisticians, like the guy we meet from James Dyson (Dyson having invented the world's most popular vacuum cleaner- you may have one - and the "Airblade" dryer now in most big airports including SFO and Heathrow) and patience for everybody else. Time and again we must grin and bear it when somebody states grandly, usually at the end of our time, that "you can't use the past to predict the future." And of course this is true. What David is trying to do is exploit patterns, consistent in the venture industry during boom and bust, to enhance the odds, in a large portfolio, that there is a higher proportion of "winners" - companies that exit in the top 1% of outcomes for any given year. Given that no vc has a clue, at the time of investment, if his company a winner or loser (recall 90% of all start-ups fail) and a third of syndicates need money and exits equally distributed between over- and under-subscribed rounds - this is greenfield. As another David says : "game changer."