pg and pmarca (so cool that you comment on HN, looking forward to your first submission) hit it on the head. Regulatory uncertainty can cause difficulties inve

pg and pmarca (so cool that you comment on HN, looking forward to your first submission) hit it on the head. Regulatory uncertainty can cause difficulties investing in certain sectors that might prove quite profitable. Lastly, I would note that profitability as an isolated metric is not a perfect indicator of future success. I can find a link if people are interested, but in his latest book Robert Shiller discusses firms that created some special financial products in the late 90s. The products were effectively betting on black swan events happening at a certain time. They ensured a high annual IRR but then if the event didn't occur their investors were left holding the bag. What made the idea profitable for the firms was that LPs that invested in years 4-6 did so based on IRR, without examining things in detail and effectively overpaid for a piece.