Firm > Fund - by David Haber - a16z

Welcome back to our “Idea of the Week” series. This week we’ve got David Haber, on the difference between a “fund” versus a “firm” and why choose the latter: I believe that most investors are running funds, and very few people are building firms. What do I mean by that? A fund, by my definition, has a single objective function: “how do I generate the most carry with the fewest people in the shortest amount of time?” Whereas a firm, in my definition, has two objectives. One is delivering exceptional returns, but the second is equally interesting: “How do I build a source of compounding competitive advantage?” Funds get more fragile with scale. So building competitive advantage becomes existential if you want to build an institution that endures. The problem is, that isn’t how fund managers are encouraged to spend their time or their focus. Most funds are run by an alpha decision maker who oversees all investments. They spend most of their time thinking about the next marginal deal, and

Welcome back to our “Idea of the Week” series. This week we’ve got David Haber, on the difference between a “fund” versus a “firm” and why choose the latter: I believe that most investors are running funds, and very few people are building firms. What do I mean by that? A fund, by my definition, has a single objective function: “how do I generate the most carry with the fewest people in the shortest amount of time?” Whereas a firm, in my definition, has two objectives. One is delivering exceptional returns, but the second is equally interesting: “How do I build a source of compounding competit