Paige Finn DohertyFounding Partner, Behind Genius · Founding Partner at Behind Genius Ventures

Verdis Investment Management VP Jamie Rhode on capturing unicorns using patterns in the portfolio

26 Oct 2022 · 1 min

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In this interview segment, Jamie Rhode, VP at Verdis Investment Management, explains how a data‑driven analysis of venture fund performance revealed that the mean return far exceeds the median return. Using the Burgess dataset (1990‑2015), he notes that investing in all 885 funds would have produced a roughly 50% internal rate of return (IRR), while the median fund returned only about 6%. To capture the higher mean returns of early‑stage venture, Verdis proposes sampling roughly 20% of the U.S. seed ecosystem—about 1,200 companies over a three‑year vintage—focusing on networks and geographies that consistently generate outlier outcomes. This approach is expected to yield between six and eighteen unicorns, illustrating a systematic method for leveraging portfolio patterns to achieve outsized returns.

Chapters

What surprised you about your portfolio's performance considering that data-driven approach? So the mean return is significantly greater than the median return, which also took me a long time to understand that. We looked at the Burgess dataset from 1990 to 2015, and if we had invested in all 885 funds, you would've gotten a 50% IRR. Where the median return is around 6% or so. So we took a look at that and said, okay, can we capture the mean return of early-stage venture by sampling 20% of the US seed ecosystem? Or if you translate that on a 3-year vintage period, it's about 1,200 companies and targeting networks and geographies with consistent outlier production, you know, and that type of analysis that we did, we thought that we were gonna get somewhere between 6 and 18 unicorns.