The (Revised) Power Law

You can’t go far in venture capital without someone referencing the power law principle: a small fraction of investments yields the lion’s share of returns in a portfolio. In fact, in Sebastian Mallaby’s The Power Law: Venture Capital and the Making of the New Future, he explores case studies of some of venture capital’s most celebrated entrepreneurs, who ultimately ignited a culture of innovation and technology that is so uniquely tied to the power law. There’s also endless insight into a world that often feels opaque and random, especially to those who dream of securing funding. 

It’s a love song of sorts — to the innovators and outliers who reshaped industries but also to the funders who saw and supported them through the early stages and beyond.  

“Venture capital as a system is a formidable engine of progress,” Mallaby writes. “More so than is frequently acknowledged.”

Like many in venture capital, AMH Catalyst Center co-founders Jenny Flores and Grace Lee read Mallaby’s book cover to cover, searching for insights to guide their work. But alongside the inspiration drawn from stories of outsized returns and legendary bets, they couldn’t ignore the underlying pattern it revealed: a system that rewards familiarity. The power law doesn’t just shape returns, it shapes access. Those already perceived as potential outliers keep getting funded, while founders who don’t fit the mold are often overlooked, no matter how promising their vision. 

“Reading Mallaby’s case studies — Arthur Rock, Don Valentine, Eugene Kleiner, Tom Perkins — it becomes clear this ecosystem wasn’t built with diverse perspectives in mind,” says Flores. “Mallaby does acknowledge what he calls the ‘monoculture’ of funding, but that’s not the focus of his story — and it’s certainly not his burden to fix. Still, the truth is hard to ignore: venture capital continues to favor founders who speak the same language, share the same references, and move in the same circles as those already holding the checkbooks.”

By the time The Power Law hit shelves in 2022, Flores and Lee had already seen what happens when capital reaches overlooked entrepreneurs. They met in 2020 while leading a national initiative to support small business owners hit hardest by the pandemic, especially those traditionally excluded from mainstream funding. The results spoke for themselves: more than 330,000 businesses supported, over 450,000 jobs created, and $2.1 billion in economic impact reinvested in communities across the country.

“Grace and I kept coming back to Mallaby’s ‘monoculture’ problem and to what we had just witnessed,” says Flores. “It made us ask ourselves: if we know a different model works, what’s stopping us from taking those learnings to build a better version of venture capital?”

A New Multiculture of Funding

What if we could reimagine networks to include more diverse perspectives and visions? And what if, in so doing, we created broader impact, more community benefits, and a greater rate of returns? 

We’d find the next frontier of VC, with plenty of data to prove it. 

Consider, for a moment, these numbers: 

• White men are 30% of the U.S. population, but they manage 93% of venture capital dollars 
• Women account for less than 15% of check-writers in the U.S.
• Only 2.1% of VC funding went to women founders, and less than 1% to women of color founders
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Then consider these numbers as well: 

• From 2019 to 2023, women-owned businesses’ growth rate outpaced the rate of male-owned enterprises by 252.8% for employment and 82.0% for revenue
• In 2019, Morgan Stanley reported that the market lost $4.4 trillion in revenue from women- and minority-owned businesses because of our funding gap

There’s an entire world of high-impact founders in need of funding and they’ve proven to benefit the whole, time and time again. 

“In venture capital, you buy into this story that the best among us are these lone-entrepreneur-wild-cards who come out of nowhere,” says Lee. “But then you see the data — and I’m talking about years of data — and you realize that it’s the people not receiving funding who are outpacing fellow founders, dollar for dollar. If you think about those numbers too long — 4.4 trillion in lost revenue?— no amount of mathematical logic can make this make sense. This is why we launched AMH.”

A New Power of Law, Written by Unexpected Founders 

Today, AMH Catalyst Center is designing technology that uses AI-driven insights and blockchain transparency to transform how early-stage founders access funding, creating smarter, more effective pathways to capital. “When we first started talking about what the industry needs most, we kept coming back to one word,” says Flores. “Transparency.” 

“So much of venture capital has historically existed in the shadows,” adds Lee. “There’s this idea that a great company comes about ‘like magic’ when someone breaks the mold, and funders recognize the power in their rebellion. And to an extent, that’s true. We have to be able to see those people, and they have to be able to see us, in order to fund the next great ventures.” 

AMH seeks to optimize for visibility in order to redefine how the most effective and creative entrepreneurs find resources. The goal is twofold: 1) to connect more women founders to the people who can help them launch and scale their companies, and 2) to bring more untapped opportunities to investors in record time. 

“Our goal is to fund a multiverse of innovation over the monoculture of traditional funding,” says Flores. “We want to meet opportunities where they are, and we want to see immediate, tangible results. That’s what transparency can give us. We’re asking venture capital to look honestly at a long-term funding gap because we think of it as a powerful space in the market just waiting to be filled. And it’s right in front of us.”