Steve Bird of Focus Ventures wrote an interesting paper on what drives venture capital returns.
The paper looks at two investment cycles: the PC era of 1983-1987 and the Internet boom of 1997-2001. In the former era, the top 50 firms represented 13% of the industry and captured 44% of the value created. In the latter era, the top 50 firms represented 4% of the industry and captured 66% of the value created.
The moral of the tale to LPs is that if you cannot get your money in a top firm then don't invest in the asset class.
Click above to get the PDF.