The Econophysics & Complex Systems Chair examines the performance of venture capital investors.

Understanding the role of randomness in economic phenomena is one of the core questions addressed by the Econophysics & Complex Systems Chair. In a new paper published on arXiv, Max Sina Knicker, Jean-Philippe Bouchaud, and Michael Benzaquen study an emblematic case: venture capital.

Venture capital is a world dominated by a small number of exceptional successes, which account for a large share of overall returns. In this context, do investors’ performance reflect a genuine ability to identify future winning companies, or can they be explained by random mechanisms?

To address this question, the authors compare real venture capital portfolios with portfolios constructed through random allocation, while preserving their main characteristics (investment stage, sector, geography, and size). The results show that observed performance distributions are remarkably close to those obtained under this random benchmark. Even the best-performing portfolios do not appear to exceed what would be expected under comparable constrained random selection.

These findings illustrate the approach developed within the Chair: leveraging tools from statistical physics and complex systems science to better understand the mechanisms at work in financial markets and the economy. They also highlight how difficult it can be to distinguish skill from luck in environments characterized by rare events and highly skewed return distributions.

Read the paper: Do Venture Capitalists Beat Random Allocation? by Max Sina Knicker, Jean-Philippe Bouchaud, and Michael Benzaquen. https://arxiv.org/abs/2605.03980

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