Silicon Valley-based venture capital firm Palo Alto Venture Science (PAVS) has launched a new fund with a $200m target.
PAVS has developed a quantitative investment strategy to target returns of over three times. The firm said that it has evaluated hundreds of startups and assigning risk scores based on multi-factor analysis.
Based on these results, PAVS founding partner Matt Oguz funded restaurant tech startup Appetas, which was bought by Google in May 2014, 18 months after inception.
The firm is looking to deploy 32 per cent of the fund to seed and early-stage businesses, 26 per cent to the expansion stage and 42 per cent to later stage venture investments.
Oguz said, “The limited partners were unhappy about venture capital returns in the past because very little has changed about the way capital was invested. By having a novel mathematical approach, we can produce consistent returns exceeding the cost-of-capital.”
“We question every ‘gut-feeling’ decision. The asset class suffers from too much self-confidence, herd mentality and the home-run mindset. We’d much rather do the math when making fund-related decisions.
“A disciplined selection process is far more effective than placing frenetic bets. If you want to invest in every startup out there, you’re better off investing in a Russell 2000 index fund.”
Similar-sized venture funds currently in the market include PTV Sciences’ fourth fund, which was launched earlier this year.
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