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Would this work for calculating the odds of startup success? Runway of 500k, a 5% chance, 100:1 odds, so don't bet more than ~$22k on each bet/pivot.
by ultra_nick 5y ago
Would this work for calculating the odds of startup success?
Runway of 500k, a 5% chance, 100:1 odds, so don't bet more than ~$22k on each bet/pivot.
- shakezula 5y agoI think it would be a good heuristic if you were able to be that precise about expenses, but I think most startups aren’t.
- paulgb 5y ago(Author here) I agree, but I think there is some applicability of the Kelly Criterion to startups (at least qualitativey) in explaining why an entrepreneur who is all-in on a company may be more inclined to take an exit than their investors, who have spread their bets.
- kqr 5y agoThe Kelly criterion is a U-shaped optimisation problem, so it is rather tolerant of imprecise estimations!
- rohitb91 5y agoIt is definitely one way to approach startup investment and why VC funds spread their bets out on so many startups. Almost all go to 0, some go 100x.
- cortesoft 5y agoThe only number you know there is the 500k… everything else is just a guess.