Venture capitalists use (mostly) other people’s money to make bets on the future, and/or to collect chunks of that money as payment to themselves for collecting the money and gambling some of it. This new paper looks back over how those bets about the future seem to compare with making random guesses:
“Do Venture Capitalists Beat Random Allocation?” Max Sina Knicker, Jean-Philippe Bouchaud, Michael Benzaquen, arXiv:2605.03980, 2026. (Thanks to Mason Porter for bringing this to our attention.) The authors explain:
Venture capital outcomes are dominated by a small number of extreme successes, making it difficult to distinguish investor skill from favorable realizations in a highly skewed return distribution. We study this question by comparing empirical VC portfolios to a constrained random benchmark that preserves key portfolio characteristics, including timing, geography, sector composition, and portfolio size, while randomizing individual company selection…. This analysis shows that even the best-performing portfolios do not exceed the outcomes expected for their rank under random sampling…. A similar conclusion holds for the performance of financial analysts in predicting future earnings.
