VC Investment Strategy

Probably the same effect that VCs invest in many startups, knowing only a tiny fraction will make a large profit?

VCs have an investment fund that is divided amongst X startups. A small percentage will break even, and a very tiny percentage will return more than the entire fund (this is where profits come from). The vast majority of companies will lose money, and in this scenario it's better to move quickly to get into the startups that will succeed rather than do the proper due diligence for every investment.Basically, speed and quantity is better than deep investigation. It's just how the num

Because it's unusual for VC firms to invest in startups?

VC didn't change. Their job is not to be judicious about investment. Their job is to invest in everything that might pay off, knowing that much of it will fail but even a single big win like finding the next Amazon will outweigh all the losses on the other investments.

VCs (venture capitalists) tend to invest in many different companies that stand a very small chance of success. Because they spread out their risk, they can make quite a lot of money from the rare success. Founders who go all in on a single idea, on the other hand, will most likely fail.

A VC or Angel knows they're taking a risk that you won't be able to handle the job, so they spread their investments over a lot of companies hoping to find that diamond in the rough. Even so they're not going to hand over money to everyone who asks for it, you need to prove yourself to them through some means other than experience. Look at how tough it is to get into YC for example.

Interesting viewpoint from Bischke: "startups doing something genuinely different just because there is no one paying them just to be another Uber for teddy bears".This betrays a lack of trust that VCs are able to judge the value of a company. That they really only invest in companies because others invest in them. Or that they invest in something they are very familiar with and are unable to recognize technological disruption.I've a startup so I've never been on the ot

I suspect this is a case of "poor venture capitalists circulate more", like poor programmers or poor boyfriends. See http://www.overcomingbias.com/2007/03/you_are_not_hir.html

VC here. The comments made about VCs being stewards of other peoples money, and therefore having a different risk tolerance are completely true. There needs to be some solid POC or a well known and trusted team or it is a no-go. But it is not about VCs being dumb finance guys -- some of us are very technical, myself I was a repeat founder and have an advanced technical degree. We invest more money in each deal than angels might in their entire lifetime, and actively help run and scale a company.

Funny how VCs can diversify risks, but founders can't. Perhaps you can concentrate your bets a bet more and believe in them harder?