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Probably closer to 100/1, or worse - that's the gamble you (should) know you're taking if you accept venture capital. It's not for everyone, but eastdakota is
by rattray 3y ago
Probably closer to 100/1, or worse - that's the gamble you (should) know you're taking if you accept venture capital.
It's not for everyone, but eastdakota is right that it's not for nobody.
- antupis 3y agoIt is tool and there is cases where you need to use that and some case where it is just stupid to use it.
- tptacek 3y agoIf it was 100/1, no VC would stay afloat, right? The math here isn't that hard to work out; it tracks the portfolio logic of the funds themselves.
- adrianN 3y agoIt is my understanding that VCs only stay afloat because the payoff in case of success is huge enough to offset many failures. And I guess many VCs also don't stay afloat forever.
- DeathArrow 3y agoIt is my understanding that most VCs expect only one in ten businesses to succeed, but that one is enough to offset the loss and ensure a profit.
- ymolodtsov 3y agoThis is correct. For small and medium funds, a single successful portfolio company can return their entire fund with some multiple on top of this. The reason you invest in 30-40 companies instead of one is because you don't know which one it'll be. I've seen this from the inside, I liked the company a lot but I'd never suspect it'd become the most obvious success for us.
- rattray 3y agoThe "fairytale" cases (IPO) are quite rare, but acquisition is a little less rare, and help support the portfolio.