One way to contextualize it is this: imagine picking investments at random. Can you tell us a bit more about what this means?What we find is, as you describe, very unique. In your paper you mention a unique shape to returns at the seed stage called an unbounded mean power law. I think one of the things the paper implies is that people that are good at finding and assessing credible seed deals will make a lot of money” I think it's possibly the most important role that can be played in the economy going forward. Is that a "credible" deal?I think one of the things the paper implies is that people that are good at finding and assessing credible seed deals will make a lot of money. Seed deals often look like two people, a slide deck, and six months of part-time work. One of the things that my team has worked on at AngelList is building machine-learning models that assess whether deals are “credible” or not.The reason that there isn't a magical money-printing machine for seed investing is that assessing whether a seed deal is credible or not is very challenging. One might advance a definition that would be something like "Is there an attainable version of this company that could raise Series A from a VC?". Based on this report, the definition of credible deals is "historical winning seed deals on AngelList", which obviously does not provide any forward guidance. I guess the tough part is defining and then finding ‘credible deals’?I think this is the central question that the paper brings up. So the idea that there are some terrific seed investors that soundly beat indices is not inconsistent with our results. Over a ten-year investment window, indexing beats 90-95% of investors picking deals, even when those investors have some alpha on deal selection. Q&A below:In a blockbuster conclusion, you found that seed stage investors should put money into every credible deal - this is a surprising finding!Yes, we found that investors could benefit from indexing as broadly as possible at the seed stage, by putting money into every credible deal, because any selective policy for seed-stage investing-absent perfect foresight-will eventually be outperformed by an indexing approach.We did do some simulations, not in the publication, on what indexing at seed actually looks like over human timescales. Abe Othman, head of data science at AngelList, just published a research paper about early-stage venture returns (mostly seed) investing that had some surprising (!) findings.
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