4 ms·
The Kelly criterion works for serial bets, but since most startup bets take 10 years to pay off, you can only make a few in series over your lifetime. You want
by tlb 7y ago
The Kelly criterion works for serial bets, but since most startup bets take 10 years to pay off, you can only make a few in series over your lifetime.
You want to have many simultaneous investments. You can model this with Black-Scholes, except you don't know any of the parameters. So in practice, just put x% of your available capital into venture bets and put your energy into picking good startups.
- cjlars 7y agoI was typing up the same comment when your hit. Kelly criterion is a great mental framework, but the math obviously doesn't work out for VC placements. The best alternative I've been able to come up with is to brute force / simulate thousands of different portfolio outcomes and optimize from there.