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That's true, but only if you actually have a rocket. You probably don't: you have a VW bug, or maybe a BMW. Almost no one has a rocket. You're right, I think.
by simpaticoder 3y ago
That's true, but only if you actually have a rocket. You probably don't: you have a VW bug, or maybe a BMW. Almost no one has a rocket.
You're right, I think. What I get reading this thread, and other sources, is that VCs will trash perfectly good VWs and BMWs trying to turn them into rockets. The reason being that only rockets have value to them. VW and BMW business are failures. E.g. a .1% chance at $1B is actually worth far more to a VC than a 100% chance at $1M even though the EV is the same.
- enedil 3y agoHow is the EV of 1% of change at $1B and 100% chance at $1M the same? The EV is respectively $10M and $1M. I actually think, that if it was the same, they would have different approach towards being a VC.
- simpaticoder 3y agoI was thinking in exponents. Maybe I made a mistake. Let's see. 1B is 10^9. 1M is 10^6. So we need a factor that takes away 3 decimal points. A percent is already taking away 2 decimal points. We need one more. So .1% of 1B is 1M because 9-3=6. I was correct. I think I see your error: you read .1% as 1%. I applaud you checking the math, even if this time you were wrong.
- enedil 3y agoOh yeah, I read it as 1%. My apologies.
- javcasas 3y agoThey are obviously not the same. But, as a founder not coming from a rich family, you may get at best 2 or 3 chances at making a decent business. So now choose: 3 chances of winning 1M at 100% probability vs 3 chances of winning 1B at 1% probability each. Which would you take if your net worth happened to be less than 200K?
- Scea91 3y agoYeah, everyone knows that mean is a bad estimator in presence of outliers or long tailed distributions. The distribution of startup outcomes is exactly that yet people talk about EVs all the time.