BowTiedBiotech

Deal Flow Quality Trumps Picking Skill for VC Success

Deal Flow Quality beats “picking skill” The figure below is a reminder that most VC chest-thumping is aimed at the wrong variable. In venture, outcomes are driven by two levers: >Pool quality (base rate): how many real winners exist in what you see >Picking skill (accuracy): how well you separate winners from noise When the pool is weak, even strong investors are forced into false positives. The signal is too thin. Better judgment helps, but it hits a ceiling fast. The chart makes the point visually: >A small improvement in pool quality drives a big jump in portfolio hit rate >Even a large improvement in picking skill moves the needle less Reason is simple Bayes. Pool quality sets the prior. Picking skill only works inside that constraint. You can’t select winners that aren’t in your universe. So “proprietary dealflow” is not a flex. It’s the job. Alpha is upstream of everything, better origination, better timing, better information flow. If you want higher hit rates, start with a better pool.