Portfolio construction is the careful calculus of a number of different decisions related to how a fund is run and the impact that each of those inputs have on each other . The major contributing factors to portfolio construction are:

One of the most important things a General Partner (GP) needs to consider early on when starting a venture fund is their portfolio construction strategy. Portfolio construction will impact nearly every aspect of running a fund, including return performance. 

Finally, another common approach is to back into the required fund value to guarantee a Net LP return multiple (i.e. net of fees and carry). For e.g. for a $100M fund to return 3x net to its LPs given the standard 2 and 20 model and $850K in total fund expenses, the total net return for the fund would have to be $370M after taking into account the... See more

Funds taking a more concentrated approach and investing in fewer companies most likely are assuming that one of their investments has an extremely large outcome while the rest either go to zero or whose exits are much more modest. This is called the power law dynamic and historically, this can be seen happening often in venture capital. Funds... See more