3 ms·

Look, I agree with you in theory, but in practice these reasons are an exception rather than the rule. 99 times out of 100 that's not why a company gets rejecte

Look, I agree with you in theory, but in practice these reasons are an exception rather than the rule. 99 times out of 100 that's not why a company gets rejected (and in the one case when it does get rejected for that reason and that reason only, the founders know it). VC business is too binary and too cutthroat for these things to matter in any other than exceptionally odd cases. Since nine out of ten investments fail, they need to fund companies that have a chance of giving a 10x return just to break even. Considering that the limited partners could put their money into treasuries instead, they probably need to double the fund's worth to justify a high risk investment. That means that other than breaking even, they need a company that has absolutely massive returns. A google, basically. There is no "ok", "good", "fantastic" and "really fantastic". It's either a google or they're out of businesses. So if a company like that comes along, unless it's a really edge case, all other reasons get swept under the rug. And if a company isn't a google, well then, it wasn't a good investment for a VC business model anyway.

mos1 17y ago
Not every VC firm expects 90% failures. As a very public counter example, Fred Wilson has stated that his lifetime failure rate is 20%. To get it that low, he most definitely had to pass a lot of profitable but high volatility opportunities. Highway 12 Ventures has 20 companies listed in it's portfolio, and 5 of them are already successful exits. Their portfolio is not large enough to allow for very low success rates, and their past experience seems to re-confirm that they do not generally invest in super-high-risk activities. Further, VCs are not interchangeable. They have different areas of expertise. This will lead to them investing in markets they understand, and often passing on opportunities in markets where they're less familiar, even if everything seems perfectly reasonable. Accusing them of being dishonest for noting that they routinely pass on good investments is absurd. I'm certain that they do so on a very regular basis.

mos1 17y ago

Not every VC firm expects 90% failures. As a very public counter example, Fred Wilson has stated that his lifetime failure rate is 20%. To get it that low, he most definitely had to pass a lot of profitable but high volatility opportunities. Highway 12 Ventures has 20 companies listed in it's portfolio, and 5 of them are already successful exits. Their portfolio is not large enough to allow for very low success rates, and their past experience seems to re-confirm that they do not generally invest in super-high-risk activities. Further, VCs are not interchangeable. They have different areas of expertise. This will lead to them investing in markets they understand, and often passing on opportunities in markets where they're less familiar, even if everything seems perfectly reasonable. Accusing them of being dishonest for noting that they routinely pass on good investments is absurd. I'm certain that they do so on a very regular basis.