An LP's diversification strategy across different venture funds is undermined when every fund converges on a single theme like AI. This creates a highly correlated portfolio, concentrating systemic risk rather than spreading it. The traditional diversification benefits of investing across multiple managers, stages, and geographies are nullified.

Limited Partners should resist pressuring VCs for early exits to lock in DPI. The best companies compound value at incredible rates, making it optimal to hold winners. Instead, LPs should manage portfolio duration and liquidity by building a balanced portfolio of early-stage, growth, and secondary fund investments.

To maintain maximum flexibility, Oren Zeev explicitly tells his LPs his only rule is that he has "no rules." This prevents him from being boxed in by a rigid strategy, allowing him to make opportunistic investments that might otherwise contradict stated ownership targets or round structures, ultimately benefiting the fund.

The primary risk to a VC fund's performance isn't its absolute size but rather a dramatic increase (e.g., doubling) from one fund to the next. This forces firms to change their strategy and write larger checks than their conviction muscle is built for.

David Cohen predicts that in a decade, the view of venture as a risky, "go big or go home" art form will be obsolete. As the asset class matures, it will inevitably adopt principles from public markets, like diversification and index-fund-like strategies. Venture will become more of a science, making it more stable and systematic.

The increased volatility and shorter defensibility windows in the AI era challenge traditional VC portfolio construction. The logical response to this heightened risk is greater diversification. This implies that early-stage funds may need to be larger to support more investments or write smaller checks into more companies.

Oren Zeev argues that LPs should seek diversification across their portfolio of GPs, not within a single fund. He believes GPs should be concentrated in their best deals to maximize returns, noting that concentration limits at the fund level don't benefit LPs who are already diversified across many managers.

LPs have a binary focus: cash-on-cash returns. As long as a VC fund is consistently distributing multiples back to them (high DPI), they are less likely to question the fund's strategy. This "what have you done for me lately" attitude is key to securing re-investment in future funds.

Many micro-VC funds raised during the 2021 peak are struggling because they deployed all capital in a short 18-month window at peak valuations. This lack of "time diversification"—spreading investments across market cycles—means their entire portfolio is underwater, leading to poor returns and difficulty raising new funds.