Challenges of Quant in Venture Capital - by Joe Hovde

Jim Simons, the legendary mathematician and founder of Renaissance Technologies, just passed away. He lived a fascinating life, moving from academia to building one of the world’s greatest money-making machines in Renaissance’s flagship hedge fund.

Renaissance, or RenTech, was a pioneer in algorithmic trading, using data to gain a small edge and making many trades so that in aggregate it made money. It’s been staggeringly successful, and gave rise to a wave of quant trading that is now a huge force in public markets. I enjoyed this book about the subject if' you’re interested.

Simons’ death made me reflect on my last job, where we worked on using quantitative strategies to make venture capital investments, specifically in early stage CPG brands (think Halo Top, Spindrift, Dollar Shave Club — this was the go-go years of the 2010s!)

I had read about the quant revolution in public markets and I listened to this podcast describing the strategy in private markets, which I found very compelling. CPG brands spin off a lot of data (they have sales from the very beginning, unlike many tech companies), so they seemed like a perfect place to apply a data-driven strategy.

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