The Architecture of Alpha

Why a Hub-and-Spoke Model Can Deliver Superior Returns

1. The Structural Challenge in Specialist Investing

The venture capital and private equity landscape has long grappled with a fundamental tension: depth versus breadth.

Firms must choose between Generalists with portfolio-wide perspective but inevitably shallow domain knowledge and Specialists with profound technical fluency but limited cross-pollination and concentrated risk. This binary choice has defined fund structures for decades and has quietly constrained returns.At ALTs Ventures, we believe this is a false dichotomy. We have engineered an investment platform that captures the best attributes of both models while systematically eliminating their respective weaknesses. The result is what we call our Hub-and-Spoke Investment Model, a deliberately architected structure that generates alpha through:

1. Superior sourcing

2. Rigorous diligence

3. Enhanced value creation

4. Complete economic alignment

This is not simply a marketing distinction. It is a structural innovation with direct implications for portfolio performance, LP returns, and the quality of support we deliver to founders.

2. The Limitations of Conventional Fund Structures

Before examining our approach, it is worth understanding why traditional structures fall short, particularly in technically complex sectors like biopharma, medtech, diagnostics, and healthtech.

2.1 The Generalist Trap

Large, generalist venture capital and private equity platforms offer certain undeniable advantages:

• Diversified portfolios

• Substantial assets under management

• Broad networks

• Operational infrastructure that comes with scale

However, these benefits often come at a significant cost when investing in science-driven or deeply technical companies.

Key weaknesses of generalist investors:

1. Lack of domain expertise to properly evaluate technical risk

2. Difficulty distinguishing between genuine scientific breakthroughs and incremental innovations dressed in compelling narratives

3. Heavy reliance on external experts for diligence, experts who may lack the investment context to translate technical assessments into actionable underwriting decisions

4. Limited relationships and credibility within specialist founder communities to access the highest-quality deal flow before it becomes broadly marketed

The result: Generalists tend to see deals later, understand them less deeply, and pay higher prices for access. In sectors where technical literacy is a prerequisite for sound investment judgment, this disadvantage compounds over time.

2.2 The Specialist Silo

Highly specialised funds address the expertise gap but introduce different challenges. A fund focused exclusively on oncology therapeutics or cardiovascular devices will possess extraordinary domain knowledge. Their partners may have spent decades as operators, clinicians, or scientists within their sector.

Key weaknesses of specialist funds:

1. Knowledge remains trapped within narrow teams

2. Portfolio support depends entirely on the bandwidth of a small group of individuals

3. Cross-sector insights rarely flow across organisational boundaries (for example, how advances in AI might transform drug discovery, or how manufacturing innovations in one vertical might apply to another)

4. Limited diversification increases concentration risk

5. Narrow mandates can lead to adverse selection, where teams feel pressure to deploy capital within their sector even when opportunities are suboptimal

6. Value creation is siloed, so portfolio companies may receive excellent domain-specific guidance but miss transformative insights from adjacent sectors

2.3 The False Choice for LPs

For limited partners, this presents an uncomfortable tradeoff:

ApproachBenefitDrawbackGeneralist exposureDiversificationSacrifices depthSpecialist allocationDeep expertiseConcentrates risk, limits synergies

Many institutional investors attempt to solve this through portfolio construction, allocating to multiple specialist managers alongside generalist platforms. But this approach introduces its own inefficiencies:

• Overlapping fees

• Coordination challenges

• Coverage gaps

ALTs Ventures was founded on the conviction that a better structure is possible.

3. How Our Hub-and-Spoke Model Works

Our platform is organised around specialised investment hubs, each representing a domain where deep technical, operational, and commercial expertise is essential for sound investment judgment.

Current hub structure:

1. Biopharma

2. Biopharma Services

3. MedTech

4. Diagnostics

5. HealthTech

We maintain the flexibility to add new hubs as our platform evolves and market opportunities emerge.

3.1 Hubs: Deep Specialisation with Operational Authority

Each hub functions as a dedicated centre of excellence. Hub leaders are not generalist investors who have "covered" a sector from a distance. They are:

• Former operators

• Engineers

• Scientists

• Clinicians

• Top-tier VC/PE professionals

These individuals have built careers within their domains and bring the pattern recognition that comes from having lived through market cycles, regulatory shifts, and technological transitions within their specialties.

Hub autonomy: Hubs operate with genuine autonomy on the activities that require deep domain knowledge:

• Market mapping

• Thesis development

• Deal sourcing

When a hub leader evaluates a novel therapeutic platform or an emerging diagnostic technology, they do so with the technical fluency and relational capital that only true domain expertise can provide.

This structured specialisation delivers measurable advantages:

1. Technical literacy that translates to better decisions

   • Direct engagement with scientific founders on their own terms

   • Ability to distinguish between genuinely differentiated mechanisms of action and me-too approaches

   • Assessment of clinical trial design, regulatory strategy, and manufacturing scalability without relying on external consultants

2. Earlier access to high-quality opportunities

   • Specialists develop reputations within their communities

   • They speak at the conferences that matter

   • They sit on advisory boards that provide visibility into emerging science

   • They maintain relationships with academic institutions, incubators, and corporate partners where breakthrough companies originate

   • This positioning translates directly into proprietary deal flow

3. Superior diligence and risk assessment

   • Understanding of where technical risk concentrates

   • Ability to interpret early data accurately

   • Recognition of when apparent progress masks fundamental challenges

   • Confidence in underwriting and avoidance of costly mistakes

4. Credibility with exceptional founders

   • The most talented entrepreneurs want partners who understand their challenges

   • Our specialists offer credibility earned through decades of relevant work

   • This is not generic promises of "platform support" but genuine domain expertise

3.2 The Spoke: Integrated Economics and Platform-Wide Alignment

Specialisation alone is not sufficient. Many specialist funds possess deep expertise but fail to maximise its value because of how they structure incentives and organisational design.

This is where our model diverges fundamentally from traditional specialist approaches.

While each hub operates with autonomy on domain-specific activities, our economic model is fully integrated across the platform. Sector leaders participate in carried interest across the entire portfolio, not merely within their own hub.

Implications of integrated economics:

1. Cross-platform alignment eliminates internal competition

   • No competition for deal credit, investment committee attention, or economics

   • No friction, hoarding of information, or suboptimal collaboration

   • Every team member benefits from every successful investment

   • Contribution is rewarded irrespective of where value is created

2. Expertise flows freely across the platform

   • When a healthtech investment requires insights from our medtech team, collaboration happens naturally

   • When an AI-enabled biopharma company could benefit from perspectives on clinical development infrastructure, there are no barriers

   • No economic barriers to sharing knowledge, making introductions, or investing time in portfolio companies outside one's primary domain

3. Portfolio support is genuinely multidisciplinary

   • AI-powered drug discovery platforms need guidance on both computational infrastructure and pharmaceutical development

   • Diagnostics companies entering clinical settings need expertise in both technology development and healthcare delivery economics

   • Our integrated model ensures support calibrated to actual needs, not limited by artificial organisational silos

4. Investment decisions benefit from diverse perspectives

   • Investment committee process brings together specialists from across our platform

   • Every significant investment decision is informed by perspectives from multiple domains

   • This diversity strengthens diligence, surfaces risks, and ensures capital allocation reflects collective judgment

3.3 Structurally Specialised, Functionally Unified

The phrase we use internally captures our philosophy: we are structurally specialised but functionally unified.

DimensionOur ApproachStructureDedicated hubs ensure every sector receives the depth of attention it demandsFunctionInformation flows across hub boundaries; collaboration is the normPortfolioCompanies engage with the full platform, not isolated teamsDecisionsInvestment decisions reflect integrated judgmentEconomicsAligned incentives around a single objective: maximising LP returns

This combination is rare. In our view, it is also essential for generating superior risk-adjusted returns in healthcare and life sciences.

4. Where Traditional Models Fall Short: A Comparative Analysis

To illustrate the practical implications of our structure, consider how different fund models handle common investment scenarios.

4.1 Scenario: Evaluating a Novel Therapeutic Platform

Consider a biotechnology company developing a first-in-class therapeutic approach based on emerging science. Proper evaluation requires understanding:

• The underlying biology

• The competitive landscape for similar mechanisms

• The regulatory pathway in relevant jurisdictions

• The clinical development strategy

• The manufacturing challenges at scale

• The commercial opportunity if development succeeds

Generalist approach:

• Engage external scientific advisors

• Review published literature

• Rely heavily on management team communication

• Risk missing subtle technical risks that experts would recognise immediately

• Extended diligence timeline to develop basic fluency

• Likely pay a premium for access to a deal that specialists saw earlier

Traditional specialist approach:

• Excellent technical judgment

• Understanding of the science, risks, and management credibility

• However, if the platform has applications where adjacent expertise would be valuable (diagnostic companion development, health system integration), a narrowly focused fund may lack the perspective

• Portfolio support will be deep but narrow

ALTs Ventures approach:

• Biopharma hub leads evaluation with full technical fluency

• Engagement with science on its own terms, drawing on relationships developed over years

• Diligence incorporates perspectives from diagnostics and healthtech teams

• Identification of companion diagnostic opportunities or digital health integrations

• If invested, portfolio company gains access to full platform for ongoing support

• Collaboration happens naturally due to integrated economics

4.2 Scenario: Cross-Sector Opportunities

Some of the most attractive investment opportunities emerge at the intersection of traditional sector boundaries:

• AI companies applying machine learning to drug discovery

• Manufacturing technologies with applications across biopharma and medtech

• Healthcare delivery platforms integrating diagnostic, therapeutic, and monitoring capabilities

How different models respond:

ModelResponseGeneralist fundsSee opportunities but struggle to diligence properly; lack depth in relevant domainsTraditional specialistsMay pass because opportunity doesn't fit cleanly within mandate, or invest without fully appreciating cross-sector dimensionsALTs VenturesAssemble diligence teams spanning multiple hubs; underwrite confidently with relevant expertise from each dimension; add exceptional value post-investment

4.3 Scenario: Value Creation at Scale

Post-investment value creation shapes outcomes as much as initial investment selection. The support a portfolio company receives during its growth phase includes:

• Strategic guidance

• Operational assistance

• Network access

• Follow-on financing relationships

Comparative value creation capabilities:

1. Generalist funds

   • Broad networks but often lack domain credibility

   • Cannot open the most valuable doors in specialist sectors

2. Traditional specialist funds

   • Deep expertise but limited bandwidth

   • Small teams cannot provide intensive support to every portfolio company simultaneously

3. ALTs Ventures

   • Full platform available to every portfolio company

   • Healthtech companies can engage with medtech specialists on hardware integration

   • Diagnostics companies can draw on biopharma team's pharmaceutical partner relationships

   • Biopharma services companies can leverage healthtech network for digital transformation

   • Multidisciplinary support is operationally embedded in how we work

5. Why This Model Generates Alpha

The ultimate test of any fund structure is performance. Our hub-and-spoke model generates alpha through four reinforcing mechanisms.

5.1 Better Sourcing

• Specialists see opportunities before they become obvious to generalist markets

• Relationships with academic institutions, corporate partners, industry advisors, and founder networks translate to proprietary deal flow

• Engagement with companies at earlier stages, often before formal fundraising processes

• Investment at more attractive valuations with greater conviction

5.2 Better Diligence

• Technical literacy enables superior risk assessment

• Understanding of where technical risk concentrates in each domain

• Ability to distinguish genuine innovation from incremental improvement

• Assessment of management teams with pattern recognition from decades of experience

• Fewer costly mistakes, more accurate valuation, better risk-adjusted entry points

5.3 Better Value Creation

• Portfolio companies benefit from multidisciplinary expertise

• Support that would require engaging multiple specialist advisors at other firms

• Strategic guidance, operational assistance, network access, and follow-on financing relationships all scale across portfolio

• Collaboration is structurally embedded in operations

5.4 Better Alignment

• Integrated economics remove internal barriers

• When every team member benefits from every successful investment:

  • Information flows freely

  • Collaboration happens naturally

  • Full resources of platform focus on maximising outcomes

• No competition for credit

• No hoarding of relationships

• No organisational friction impeding value creation

These mechanisms reinforce each other:

Better sourcing → Better diligence opportunities → More confident investment → Better value creation → Compounded returns → Full realisation through alignment

6. What This Means for Limited Partners

For institutional investors, our hub-and-spoke model offers a distinctive value proposition:

6.1 Exposure to High-Conviction, Deeply Underwritten Opportunities

• Every investment reflects judgment of specialists who understand their sectors at a granular level

• Confidence that technical risks have been properly assessed

• Valuations reflect informed judgment

6.2 Diversification with Depth

• Multi-hub structure provides exposure across healthcare and life sciences subsectors

• Specialist expertise maintained in each domain

• This is not shallow generalist diversification but genuine breadth combined with genuine depth

6.3 Cross-Sector Alpha Capture

• Platform positioned to identify and capitalise on opportunities at sector boundaries

• AI applications in biopharma

• Manufacturing innovations across medtech and diagnostics

• Digital health transformations in healthcare delivery

• Ability to see and act on cross-sector themes that others cannot

6.4 Operational Efficiency

• Multiple specialist capabilities within a single integrated platform

• Benefits of specialised allocation without:

  • Coordination challenges

  • Overlapping fees

  • Coverage gaps from managing multiple specialist manager relationships

6.5 Alignment You Can Trust

• Economic structure ensures every team member is incentivised to maximise portfolio-wide returns

• Confidence that internal dynamics support the pursuit of superior performance

7. Conclusion: Structure as Strategy

Fund structure is not a back-office consideration. It is a strategic choice with direct implications for investment outcomes.

At ALTs Ventures, we have made that choice deliberately.

Our hub-and-spoke model reflects our conviction that the best healthcare and life sciences investments require both:

1. Depth: Deep specialisation to properly evaluate technical opportunities

2. Breadth: Broad integration to maximise value creation and capture cross-sector alpha

We have built a platform that delivers both.

For limited partners seeking:

• Exposure to healthcare and life sciences

• Confidence that comes from specialist expertise

• Benefits that flow from integrated collaboration

ALTs Ventures offers a differentiated approach, one that we believe is uniquely positioned to generate superior risk-adjusted returns.