Why Does Diversification Inside One Fund Have No Value?

Oren Zeev says diversification inside one fund has zero value for LPs, because they already invest in multiple managers. A manager should not put the whole fund in one company, and he would not put an entire fund in two companies. A fund also does not need 30 or 40 companies. When 10 companies produce bad results, the problem was not investing in 10 instead of 20. The problem was elsewhere, and he floats a terrible vintage, no advantage in access, or poor judgment as the open possibilities.

One of his funds held only five companies, and it worked. Two were clear home runs, one is still undecided, and two are alive but probably will not work. Two out of five as huge home runs carried the result. He led the seed of Next Insurance at incorporation, and Munich Re acquired it nine years later for 2.7 billion. The other winner was Navan. He led the seed personally before he had the fund, then led the A from the fund. Navan returned much more than 100X and is a public company worth $7.5 billion. He originally invested at a $10 million pre, and a lot of dilution still left a win.

A headline said he invested 50K and made a billion. He never invested 50K in Navan. His stake is worth more than a billion, and he invested a lot more than 50K. He put 50K personally into the previous company, and the check created the relationship before he invested in Navan.