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What this actually means is that VCs have no idea if a company will be successful or not and it's basically luck. The ones that survive are the ones who manage

What this actually means is that VCs have no idea if a company will be successful or not and it's basically luck. The ones that survive are the ones who manage to hit one of their gambles with outsized wins, similar to a roulette table. Why some continue to believe VCs actually know anything or add value is beyond me. Even YC admits as much, saying their best guess is the caliber of the founder, and that there should be at least 2 co-founders. Everything else is a guess.

JumpCrisscross 9y ago
> VCs have no idea if a company will be successful or not and it's basically luck This anti-portfolio is a sample of Bessemer's Type II errors [1]. It does not follow that they are useless. (Their returns are far from useless.) [1] https://en.wikipedia.org/wiki/Type_I_and_type_II_errors https://en.wikipedia.org/wiki/Type_I_and_type_II_errors
- pfarnsworth 9y ago
  Wrong. If you have enough money, and your gains are sufficiently outsized from a win, then any spread bet across dozens of companies will end up making money. Being a VC in Silicon Valley over the last 20 years is a game you can't lose, as long as you have enough money. And let's not forget, they're not even playing with their own money, they are playing with their investors money. But it doesn't mean you're a smart VC it just means that you're a rich VC. They have enough high profile misses to show they have no idea what is going to be successful. They passed on Google, Apple and Facebook with a combined market value of almost $1.5 trillion dollars.
  - JumpCrisscross 9y ago
    > Being a VC in Silicon Valley over the last 20 years is a game you can't lose, as long as you have enough money You won’t find a source for this because it isn’t true. Lots of VCs have busted because despite diversification, the odds of a single company in a portfolio of 20 to 100 making it big are very small.
    - pfarnsworth 9y ago
      Thanks for your anecdotes.

JumpCrisscross 9y ago

> VCs have no idea if a company will be successful or not and it's basically luck This anti-portfolio is a sample of Bessemer's Type II errors [1]. It does not follow that they are useless. (Their returns are far from useless.) [1] https://en.wikipedia.org/wiki/Type_I_and_type_II_errors https://en.wikipedia.org/wiki/Type_I_and_type_II_errors

pfarnsworth 9y ago
Wrong. If you have enough money, and your gains are sufficiently outsized from a win, then any spread bet across dozens of companies will end up making money. Being a VC in Silicon Valley over the last 20 years is a game you can't lose, as long as you have enough money. And let's not forget, they're not even playing with their own money, they are playing with their investors money. But it doesn't mean you're a smart VC it just means that you're a rich VC. They have enough high profile misses to show they have no idea what is going to be successful. They passed on Google, Apple and Facebook with a combined market value of almost $1.5 trillion dollars.
- JumpCrisscross 9y ago
  > Being a VC in Silicon Valley over the last 20 years is a game you can't lose, as long as you have enough money You won’t find a source for this because it isn’t true. Lots of VCs have busted because despite diversification, the odds of a single company in a portfolio of 20 to 100 making it big are very small.
  - pfarnsworth 9y ago
    Thanks for your anecdotes.