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Upvoted, but if I am not mistaken those statistics are for false positives (VC thought idea would work, but it didn't.) What we're concerned about here are fals
by jbellis 15y ago
Upvoted, but if I am not mistaken those statistics are for false positives (VC thought idea would work, but it didn't.) What we're concerned about here are false negatives (VC thought idea wouldn't work, but it did).
I could be wrong, but I would bet the true negative:false negative ratio for a good VC is (1) very, very high and (2) higher than Joe Average who doesn't do this for a living.
Sure, nobody has a perfect crystal ball (famously, http://www.bvp.com/Portfolio/AntiPortfolio.aspx http://www.bvp.com/Portfolio/AntiPortfolio.aspx) but that doesn't mean there's no value in getting input from someone whose job is to get it right more often than your roommate. I'd even go so far as to say that any really great idea should go through a chorus of "that will never work"s as a kind of conditioning process.
- ScottBurson 15y ago> I would bet the true negative:false negative ratio for a good VC is very, very high I'll take the other side of that bet! VCs are trying to optimize their TP:FP ratio; they don't get paid for minimizing FNs. I'd bet, in fact, that their TN:FN ratio is little if any better than average. There are exceptions, but VCs on the whole have a reputation for groupthink, not for being visionaries.
- qq66 15y agoYou're totally wrong about the (true negative|false negative) ratio. Most early-stage businesses that pitch VCs get turned down by more than half the VCs they approach (this is changing as angel rounds are getting businesses to traction). The phenomenon of "hot deals" is very rare. So for every VC investment into a Facebook, Zappos, Zynga, etc. there are multiple VCs who turn it down, pushing this ratio under 1.