by Patrick O’Shaughnessy
My guest this week is Chris Douvos, a managing partner at Venture Investment Associates, which allocates 1.6B in behalf of investors.
Chris is the first professional allocator I’ve spoken with who focuses specifically on venture capital funds, so I had a ton of questions for him on how to build a portfolio in an asset class known for uncertain, but often enormous, outcomes.
We discuss the major recent changes in the asset class and where things might be going.
I sought Chris out because while this is an investment style that is full of creativity and hope, I’ve always felt it could use a healthy dose of skepticism and a value investor’s mindset. He delivers in spades as we try to separate the real from the ideal.
We didn’t record it, but Chris’s tour of Palo Alto was one of the most interesting and entertaining hours I’ve spent. He is a student of history and markets, and I look forward to learning more from him in the future.
Please enjoy our conversation
2:18 – (First question) – Four factors that Chris thinks are important for future success of venture firms; portfolio concentration; repeatability; being early; size discipline
7:40 – What the venture landscape looks like today from Chris’s viewpoint
14:07 – Is there a glut of startups making it difficult for investors
17:33 – How does Chris think about the investments that are a bit different from what everyone else is investing in in Silicon Valley
19:17 – Why he focuses on college campuses for innovation
20:54 – The role that geography plays in venture
25:06 – The Four M’s; money, momentum, mentorship, entrepreneurial management
27:13 – Chris’s perspective on crypto currency as a threat to venture capital
31:44 – The idea of venture capitalists as service providers to the companies they are investing in
35:15 – Views on investing in hyper focused VC’s vs those that are generalists and just go after the best opportunities in any sector
39:00 – What hot button areas are of most interest to Chris and why, from an investment standpoint
39:38 – Domino Rally Business Models
42:22 – What can a public market investor learn from a value venture investor who mostly has to rely on qualitative metrics
43:08 – All About the Benjamins
44:38 – Portfolio construction in the world of venture
46:40 – Speak Like the Locals
48:00 – What are the characteristics that Chris looks for in managers, as an allocator
53:52 – What type of investors should and should not be in venture
59:15 – What type of allocator would Chris give all of his money to
59:47 – David Salem podcast episode
1:01:06 – Curveball
1:01:40 – Kindest thing anyone has done for Chris