>This is because the portfolio strategy (1 hypergrowth + 20 failures) is the best strategy from the VC perspective. Duh? You say that as if it should be consid

>This is because the portfolio strategy (1 hypergrowth + 20 failures) is the best strategy from the VC perspective. Duh? You say that as if it should be considered surprising. It would be surprising if it were an irrational preference, not a completely rational preference. The real question is why the economy is geared towards such an uneven distribution of returns. I don't think it's a law of nature (e.g. economies of scale) because for pretty much all corporations there are massive diseconomies of scale that offset that. You just have to work at one of them to see how manifestly inefficient they are, and yet they still dominate and investors still exhibit an exceptionally strong preference for them. I think may be an artefact of the American tax and legal system which allows the use of size and wealth as market leverage to an extreme degree. Investors prefer to see one big Uber/Microsoft/Google over a hundred smaller Uber/Microsoft/Googles because that one big company, can legally use its size to crush smaller, more efficient competitors and thus achieve monopoly or oligopoly power which it can safely use to wring profits out of customers without fear of being undercut. If the legal and tax system cracked down on this phenomenon instead of covertly encouraging it (e.g. with stuff like tax holidays for Apple) I think VCs would probably adjust their preferences accordingly.