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I believe the logic of VC investing is misplaced here. That their subsequent investments did worse than FB is not evidence of anything at all really. In parti

I believe the logic of VC investing is misplaced here. That their subsequent investments did worse than FB is not evidence of anything at all really. In particular, almost all VC fund returns are weighted towards a few big winners, some ok winners, a bunch of zombies and a lot of failures. There is a 'FB' in every successful VC fund. Most VC just didn't just magically appear as VCs and then magically/luckily invest in FB. It was a long path for most of those funds and individuals. There is luck involved, surely, which is why funds have a lot of companies in their portfolio.

yomkippur 4y ago
But why is it that some VC are clearly better at this dice rolling? ex. Sequoia Again and again they seem to be able to discover these home runs or is it that they are able to use their vast network of influence to manufacture success? It all reminds me of poker. High stacks dictate/influence/restricts other participants with less stacks.
- jollybean 4y ago
  ? Because it's not 'dice rolling'. And yes, they will use their network to create good outcomes, that's fine.
  - yomkippur 4y ago
    it's not guaranteed it's not reproducible
- tshaddox 4y ago
  Why is there a winner of every paper rock scissors tournament?
azemetre 4y ago
It could be evidence that the idea of VCs may not be a reliable way of investing. Nassim Taleb stated that in 2009, within an 18 month window, banking industry lost all the profits it ever made since the beginning of banking as an industry. Such a catastrophic event isn't out of the question for VC either.
- deleted 4y ago
  [deleted]
- jdsully 4y ago
  > Such a catastrophic event isn't out of the question for VC either. It is out of the question with the current legal system. Because of limited liability for this to be true they would have to have invested more than the total profits. The individual investments could lose a lot of money but the VC loss is capped at their original investment.
pessimizer 4y ago
> There is a 'FB' in every successful VC fund. Tautologically. There isn't a facebook in any failing VC fund. So it's really unnecessary to talk about VC strategies at all if you're going to define a successful strategy as having once invested in some whale early and ignore all of the other failures, it's sufficient to just ask for a list of the investors in things that did well and declare them shrewd.
- jollybean 4y ago
  Not rally, if you take the reality of it a big further i.e. 'there is an FB in every vintage' or more like 'there are a 'few big hits' in every vintage' - you'll find that the pattern is repeated over and over by good VC's who can demonstrate their consistency.

yomkippur 4y ago

But why is it that some VC are clearly better at this dice rolling? ex. Sequoia Again and again they seem to be able to discover these home runs or is it that they are able to use their vast network of influence to manufacture success? It all reminds me of poker. High stacks dictate/influence/restricts other participants with less stacks.

jollybean 4y ago
? Because it's not 'dice rolling'. And yes, they will use their network to create good outcomes, that's fine.
- yomkippur 4y ago
  it's not guaranteed it's not reproducible
tshaddox 4y ago
Why is there a winner of every paper rock scissors tournament?

azemetre 4y ago

It could be evidence that the idea of VCs may not be a reliable way of investing. Nassim Taleb stated that in 2009, within an 18 month window, banking industry lost all the profits it ever made since the beginning of banking as an industry. Such a catastrophic event isn't out of the question for VC either.

deleted 4y ago
[deleted]
jdsully 4y ago
> Such a catastrophic event isn't out of the question for VC either. It is out of the question with the current legal system. Because of limited liability for this to be true they would have to have invested more than the total profits. The individual investments could lose a lot of money but the VC loss is capped at their original investment.

pessimizer 4y ago

> There is a 'FB' in every successful VC fund. Tautologically. There isn't a facebook in any failing VC fund. So it's really unnecessary to talk about VC strategies at all if you're going to define a successful strategy as having once invested in some whale early and ignore all of the other failures, it's sufficient to just ask for a list of the investors in things that did well and declare them shrewd.

jollybean 4y ago
Not rally, if you take the reality of it a big further i.e. 'there is an FB in every vintage' or more like 'there are a 'few big hits' in every vintage' - you'll find that the pattern is repeated over and over by good VC's who can demonstrate their consistency.