E204: Going All In: The Risks and Rewards of Concentrated Investing
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode, Rafael shares his journey from top-tier growth equity firms to launching Across Capital, a concentrated fund focused on software businesses across the Americas. He dives deep into Brazil's remarkable fintech ecosystem (02:20), explaining how hyperinflation and progressive central banking created fertile ground for innovation, while exploring his concentrated portfolio strategy of just 10 companies that forces "ruthless prioritization" (07:02). Rafael also discusses why growth equity differs from venture capital in prioritizing consistency over power laws, how his firm's QiTech investment became a potential fund returner (10:54), and the compounding advantages of market leaders in an AI-driven world.
Speakers
Rafael Alvarez
Managing Partner at Across Capital, previously investment professional at Summit Partners and Vulcan Capital (Paul Allen's investment arm). Brazilian-born investor focused on cross-border technology investments across the Americas, with a concentrated 10-company portfolio strategy that has generated multiple fund-returner outcomes.
David Chen (Host)
Host of the How I Invest podcast, conducting in-depth conversations with leading investors and entrepreneurs. Known for exploring investment strategies and career insights with industry professionals across venture capital and growth equity.
Key Takeaways
Build High-Conviction, Concentrated Portfolios
Limit your portfolio to 10 companies maximum—concentration forces ruthless prioritization and deeper diligence. When you only get 10 shots, you lean into your edge and drive meaningful partnerships rather than buying call options. (07:07) This scarcity mindset changes how you source, engage, and select investments, creating powerful alignment with entrepreneurs.
Master the 17-Month Relationship Strategy
Invest in relationship-building 17 months before making an investment decision. This extended courtship allows you to earn your seat at the table with entrepreneurs and build conviction to move with efficiency and speed when they're ready to transact. (09:08) Focus on 30 opportunities per quarter in your middle funnel to identify your 2-4 annual investments.
Institutionalize Your "What Really Matters" Framework
Create a systematic process where every investment memo includes a slide limiting critical success factors to no more than five key drivers. (17:02) When re-underwriting investments, objectively assess performance against these specific metrics using quantitative measures wherever possible. This prevents retrofitting narratives and maintains disciplined decision-making.
Size Positions Based on Conviction, Not Diversification
Don't default to equal-weighted positions—increase allocation to your highest-conviction bets over time. QiTech started at 12.5% allocation and grew to 20% as the company consistently beat projections. (15:08) Back your winners when they demonstrate superior risk-adjusted returns rather than spreading capital thin across mediocre opportunities.
Focus on Consistency Over Power Laws in Growth Equity
Target consistent 3-5X returns with strong downside protection rather than chasing binary 10-30X outcomes that could zero out. Build portfolios where capital impairment risk is minimized through stage selection, deal structure, and company IP analysis. (13:03) This approach enables concentrated portfolios while preserving upside potential through proper position sizing.
Statistics & Facts
- QiTech grew 200% plus year over year with EBITDA margins in excess of 50%. (05:15)
- PIX (real-time payments rail) has achieved penetration of 80% plus of the adult population in Brazil. (03:39)
- QiTech represents a 20% position in Across Capital's fund and was valued close to $2 billion in the latest round, up from their initial $300 million investment. (11:06)
