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Banks do that. VC money is for the high-risk. A lot of their punts fail (companies die), so you need to make enough money off the ones that succeed that you co
by buro9 15y ago
Banks do that.
VC money is for the high-risk. A lot of their punts fail (companies die), so you need to make enough money off the ones that succeed that you cover all your losses and still make a great pile of money on top for future investments and profits.
The only way to make that stash of cash off the winners is to exit for high returns, and in the case of backing a winner to increase the stake over time so that your high returns are multiplied by the stake size.
This shouldn't be news to anyone. Did you think VCs were your friends?
- jiggy2011 15y agoI understand that point , but surely if there is a lower risk then you can afford to not get a higher pay off. I mean surely there's a case for investing in say a consultancy business and rather than worrying about a high ROI in 3 years simply take a small % per year throughout the life of that company? Either that or consultancy businesses in general have a crappy risk/reward ratio in which case I am surprised they are so popular.
- SemanticFog 15y agoVCs would happily invest in low risk, high-return investments -- that is in fact what they are looking for. But wherever there is truly low risk, multiple funding sources will compete, and returns will be driven lower. Companies that fit the profile you describe will generally use debt financing, which is not available to venture startups.