3 ms·
The point is that, to a VC, a small return is indistinguishable from losing all the (not "your", since they rarely have much, if any of their own money in it) m
by mmt 8y ago
The point is that, to a VC, a small return is indistinguishable from losing all the (not "your", since they rarely have much, if any of their own money in it) money.
Given their economics, VCs have a very strong incentive (or an imperative, according to that article) for "forcing everyone to 10X+" (and I would argue it's more like 20x+), no matter how small the likelihood of that outcome. Without at least one outsized exit, they're a failure.
Put another way, their LPs aren't paying them to, in any way, play it safe. Near-zero chance isn't the same as zero.
So, yes, the choice for a typical VC isn't difficult. It's just the opposite of what you're proposing.
- icelancer 8y agoIf VCs actually think that, they are pretty bad at math. It is not indistinguishable. But even if it is (and I repeat, it is not, otherwise it wouldn't be so hard to get funding for $1-2MM), then they are unethical, terrible people who have no conscious about other people. Which I suppose is just repeating what most people say here, but worth connecting it to numbers.
- mmt 8y ago> they are pretty bad at math You've been couching your assertions in hyperbolic judgmental-sound terms, which I fear detracts from your point, but this seems to be the crux of it. You have not, however, demonstrated the "math" in your viewpoint. Specifically, how does it work out, being sure to include risk (or probability) as a factor? > otherwise it wouldn't be so hard to get funding for $1-2MM That doesn't follow, as any difficulty can be adequately explained by (perceived) likelihood of an outsized return (100X+). Are you sure you're not confusing VCs with lower (e.g. average) risk investors?