Rethinking Biotech Venture Strategy | Ep. 648

Is the Power Law Broken?

Hello Avatar! Welcome back for another week of biotech analysis. Today is Sunday, which means this is our Building Biotech newsletter that is focused on discussing biopharma strategy topics. In today’s newsletter, we’re diving into one of the most overlooked drivers of venture returns: portfolio size. We explore why most VC funds are structurally misaligned with the power-law dynamics that define the industry and how increasing the number of investments might be the simplest, most effective way to improve outcomes. Whether you're an emerging manager, an LP, or just curious how venture math works, this one’s for you.

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Introduction

In venture capital, tradition has long favored concentration.

Most funds invest in fewer than 40 companies. The logic? Stay close to your founders. Sit on boards. Be hands-on. Maximize influence, minimize distractions.

But what if this approach, romantic as it may sound is exactly why most VCs fail to outperform public markets?

Dave McClure, founder of 500 Startups, made this argument nearly a decade ago in his provocative essay 99 VC Problems but a Batch Ain’t One. And the core thesis still holds up today:

“If you're trying to capture billion-dollar outcomes in a power-law world, you need way more shots on goal.”

The Unicorn Problem