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How can you deal with the huge risk of failure without compensating with huge wins?
by personjerry 8y ago
How can you deal with the huge risk of failure without compensating with huge wins?
- nathan_f77 8y agoI think they are changing the definition of failure.
- webmaven 8y agoThis shouldn't be downvoted. Changing the definition of failure is definitely what they're doing. For a VC, anything that doesn't result in a liquidity event is a failure (in fact they might shut down an otherwise profitable company to sell off the IP and other assets for a pittance just to get it off their books). TinySeed seems perfectly comfortable with no liquidity event ever happening, and just taking a cut of the profits.
- auntad 8y agoJudging from Rob Walling's thoughts on this topic from his book -- the equation looks different for the kind of company they're looking for. There's no "huge risk of failure"; the focus is on businesses highly likely to succeed that will have (relatively) slower, but consistent, growth. And obviously (relatively) lower final valuations.
- rwalling 8y agoBingo. Instead of 1 in 20 becoming a huge success (100x) and the other 19 fail, maybe for us it's 10 in 20 are "base hits" that return 2-5x and the other 10 fail. Those are contrived numbers for this example, but you get the idea. I expect more of them to be singles/doubles, fewer to fail than the typical VC bets, but we'll have no home runs.
- personjerry 8y agoWhat will allow you to get higher % of successes than a typical VC?
- whb07 8y agoHave you seen the total returns of VC money? Too lazy to link stuff now but a perfunctory search will reveal that the returns are not what you think they are. They essentially approach 0% outside of the few powerhouses. Can’t really use the Andreessen-Horowitz / Sequoia returns as representative to the entire industry.
- personjerry 8y agoYour evidence would seem to suggest that the TinySeed venture is very likely to approach 0% as well, no? Which is my concern exactly.