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A new paradigm for venture­capital investments—good idea, good execution, good money—could be more rewarding for all players By Michael Loeb

Innovation - OpEd NY

OP-ED

Primed for Success

40

INNOVATION & TECHNOLOGY

Consider an alternate universe where the failure rate is 4 out of 5. So, 80% of the time you turn on the lights or TV, or walk into an elevator ... nothing. Doctors would optimistically give you a 20% chance of survival, accountants would most likely have you pay someone else’s taxes, your phone would misconnect the vast majority of time, and only a fraction of the news would be reliable. Crazy, right? So why is this acceptable for venture capital? VCs proudly admit to a success rate of 1 in 5. From my vantage point, this causes huge problems of a fundamental sort. Foremost is the cost of capital. Rare winners carry the mighty burden of many losers plus VC overhead (Harvard educations don’t come cheap) plus VC profits (neither does detached housing in Menlo Park). All this gets baked into the cost of a deal with sneaky terms. (Spoiler alert: They slay with terms.) Another is the megahit-driven mentality. Like a homerun hitter who insistently swings for the fences, it is the four-baggers who maintain the venture adventure. Notably, even the most renowned names

WE’VE SEEN MORE THAN ONCE THAT SLOW AND STEADY WINS THE RACE, WHICH IS WHY OUR INVESTMENTS ARE USUALLY LIFETIME PARTNERSHIPS

Profile for CSQ Magazine

C-Suite Quarterly - New York  

Q1 2019 | Innovation & Technology

C-Suite Quarterly - New York  

Q1 2019 | Innovation & Technology

Profile for csuite