Assuming: - It takes two years for a start up to go from $20m to $200m - The two year startup failure rate is greater than 1 in 8. - The performance risks of

Assuming: - It takes two years for a start up to go from $20m to $200m - The two year startup failure rate is greater than 1 in 8. - The performance risks of independance are about equal to the performance risks of being owned (capital scarcity etc vs loss of agility etc). It makes more financial sense to buy at £200m than at £20m, assuming your information is imperfect. Working: $20m + $2.05m inflation (5%) + $4.2m cost of capital (10%) = $26.25m. Cost of risk ~= $200m/$26.25m = 7.6 multiple. (The cost of acquiring better information can be costed, of course, and the new probabilites and expected value calculated - which may be a better strategy, but information is not free, especially if you need to employ $400k/yr+ 'CAOs').