The article makes excellent points. VCs fund a zillion different projects, playing the odds that one of them will make a mint. For the individual project, - which is you - the chances of success are very small.
One comments says that venture funding is rocket fuel. 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.
Anyway, I honestly don't understand the craving to hit a $billion business. It's completely unrealistic - it's just not going to happen. Creating a business that can support you, turning over 6-digits (instead of 9 or 10) is much more realistic. You won't get VCs on board for that, nor do you need them.
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.
How 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.
I 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.
They 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?
Yeah, 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.
> Anyway, I honestly don't understand the craving to hit a $billion business. It's completely unrealistic
I think what the author is missing is that founders could have massive exits in the previous bubble in Series B rounds and walk away with millions. With that possible outcome available it's rational for founders to play the bubble game.
Otherwise, I agree, defining success as building an $X billion revenue business is completely irrational when there are infinite many success scenarios between 1million and $1 billion in revenue that you miss out on once you over grow your business' expenses.
One comments says that venture funding is rocket fuel. 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.
Anyway, I honestly don't understand the craving to hit a $billion business. It's completely unrealistic - it's just not going to happen. Creating a business that can support you, turning over 6-digits (instead of 9 or 10) is much more realistic. You won't get VCs on board for that, nor do you need them.