Beta - Latest Comments in Failure Rates In Early Stage Venture Deals

Re: Failure Rates In Early Stage Venture Deals

Bill Palmborg — Wed, 16 Jul 2008 18:41:28 -0000

Hi Fred,

Saw you open an dinterseting blog today when browsing for start up Venture capital.

What about this promise:

----------3-years' Recipe to get bigger than MasterCard or Visa ----------.

Stupidity !

So they once said to Bill Gates, IKEA/Kamprad and 100,000 others too.

----------

If you have a tool

--that makes online shopping 100% secure,

--that requires the eMerchant/bank/etc to 100% authenticate to eShopper BEFORE he leaves away his ID to the Black Hole we call the Internet,

--that detects if the eShopper is using somebody else's card BEFORE card holden even noticed of the card loss,

that stops distribution of personal ID for fake shopping or counterfeit cards

--that makes insiders, bogus webshops, wiretap and data breaches of no means

--that releases 25 mln webshops from each risk of fraud,

--that releases them from no more costs of heavy security systems and

a 50% reduction of the chargebacks.

do you join my opinion that this new plastic card gets bigger than MasterCard or Visa in 3 years if funded?

do we agree that an aggressive US bank wants to grab market sharew of the Payment Card Industry if the bank had a slaughter tool like this?

Do you believe Microsoft grasps this a competitive tool against Googles in case of controlling the payment process servers?

I believe it and I have invented/patented more than this.

If you believe it - can we discuss it ?

Best Regards

Bill

bill.palmborg@privatpost.se

Re: Failure Rates In Early Stage Venture Deals

photoshop proje — Tue, 20 May 2008 08:29:58 -0000

thx. man.

Re: Failure Rates In Early Stage Venture Deals

photoshop — Tue, 20 May 2008 08:27:48 -0000

thank you very much. photoshop professional.

Re: Failure Rates In Early Stage Venture Deals

ankraj — Tue, 20 May 2008 08:26:21 -0000

thank you. ankraj malzemeleri

Re: Failure Rates In Early Stage Venture Deals

mobilya — Tue, 20 May 2008 08:23:01 -0000

thank you. Mobilya dekorasyon

Re: Failure Rates In Early Stage Venture Deals

assembly programlama dili — Tue, 20 May 2008 08:21:58 -0000

thank you. assembly

Re: Failure Rates In Early Stage Venture Deals

c programlama dili — Tue, 20 May 2008 08:10:39 -0000

thank you.

Re: Failure Rates In Early Stage Venture Deals

danışmanlık — Tue, 20 May 2008 08:08:24 -0000

thank you.

Re: Failure Rates In Early Stage Venture Deals

helva — Tue, 20 May 2008 08:07:26 -0000

thank you

Re: Failure Rates In Early Stage Venture Deals

güvenlik şirketleri — Mon, 19 May 2008 09:47:25 -0000

One point of friction between entrepreneur and VC that I have seen is based on the fact that a VC is hedged by having a portfolio whereas as the entrepreneur's financial health is totally tied up in that one venture. So when a VC wants to "shoot for the moon" to get that 10x return, the risk to the entrepreneur needs to be considered. Güvenlik, güvenlik elemanları güvenlik personelleri güvenlik şirketleri.

Re: Failure Rates In Early Stage Venture Deals

ersin — Wed, 07 May 2008 16:00:43 -0000

Your initial assumption is that the average return will be around 3.2x, so we can pretend that each investment is an exponential random variable with mean 3.2 (and hence lambda parameter 1/3.2 = 0.3125). Thanks for opening up an interesting discussion, which recalled a study I read earlier this year by Juan Villalobos of Angel Venture Partners of success rates in early-stage investments

Re: Failure Rates In Early Stage Venture Deals

Investblogger — Fri, 29 Feb 2008 14:40:45 -0000

Hi there,

My name is Ethan Suplee , I just signed up. I hope, I am posting in the right section, and I am sorry, if I posted in the wrong place,

moderators, please move this post accordingly.

Early last year, I stumbled upon information about

investment private clubs, that are not readily available to the public. The yields, which people could

receive by participating in such funds, appeared

surprisingly high at

first, but as I studied more about them, I began to make a lot of money. These days, I consider

myself being the successful

investor. My next step, is marketing field, so, I

made available the blog, which

shows detailed information

about real investment

funds. If you would like to see my

blog, [url=HTTP://WWW.FINANCESECURE.NET]click here[/url].

I would appreciate

user's feedbacks.

Re: Failure Rates In Early Stage Venture Deals

Himanshu Sahani — Mon, 25 Feb 2008 11:16:10 -0000

Hi Fred,

Not sure if I understand this clearly, but when you say 1x or 5x times return on capital invested, is that within a certain time period associated for the return to get counted? For example when you say "Three of the unrealized deals are 1999 vintage Flatiron investments which will almost certainly end up in the 1x to 5x category" what timeframe are you looking at?

Thanks

HimS

Re: Failure Rates In Early Stage Venture Deals

Michael Rivers — Mon, 03 Dec 2007 13:52:35 -0000

Fred

Thanks for opening up an interesting discussion, which recalled a study I read earlier this year by Juan Villalobos of Angel Venture Partners of success rates in early-stage investments: http://tinyurl.com/yunza3.

Michael

Re: Failure Rates In Early Stage Venture Deals

terrycojones — Sat, 01 Dec 2007 02:43:07 -0000

Hi Fred

I'll keep this brief, to let someone with better knowledge of stats improve it, and provide less opportunity for them to jump all over me...

One question is to ask whether you're really doing well or if your performance could be due to chance

For example, and this is just an example analysis, suppose we model the return of an early stage investment with an exponential distribution. Your initial assumption is that the average return will be around 3.2x, so we can pretend that each investment is an exponential random variable with mean 3.2 (and hence lambda parameter 1/3.2 = 0.3125).

You're counting 26 deals. If we take the sum of exponentially distributed random variables, the result follows the Erlang distribution. The Erlang dist has a mean of k/lambda (where k is the number of exponential random variables being summed). For k=26 lambda=0.3125, that's a mean of 83.2. Plugging in approximations for your returns, you have 11x7.5 + 10x2 = 102.5 in total return. So you're well above average, given all assumptions. But how far above average is that really?

The variance of the Erlang dist in your case is k/lambda^2 or 26/0.3125^2 = about 266. So the standard deviation is sqrt(266) or about 16.3

Without going into p-values and Null Hypothesis (I'm about to get on a 6-hour late plane, I hope), that places you just over one standard deviation away from the mean of that distribution. You can use the probability distribution function of the Erlang dist to see just what proportion of samples would be further from the mean, etc. But given the number of assumptions already, it may not be worth pressing on. One standard deviation away from the mean is nice, but it's also fairly inconclusive. We'll just have to give you the benefit of the doubt, I guess :-)

Did I say already that there are a lot of assumptions in the above?

BTW, I've been planning a blog entry on figuring out how good you are at something, and comparing that to efforts in totally different domains (was Babe Ruth a better hitter than Tiger Woods is a golfer?) and it's based on number of standard deviations from the mean.

Terry

Re: Failure Rates In Early Stage Venture Deals

Dennis Eusebio — Fri, 30 Nov 2007 16:34:22 -0000

Mind posting this on Only Human? Its a site that allows people to share their mistakes in hopes of helping others. You don't even have to sign up to post your story.

I think our users would love to hear more about your experiences.

http://www.weareonlyhuman.com

Re: Failure Rates In Early Stage Venture Deals

rk — Fri, 30 Nov 2007 15:29:32 -0000

I think in a world of increasingly smaller investments to get a net company started and increasing number of net startups, the measure of a vc's career success should be net dollars returned overall vs failure od success in terms of number of deals.

For example, you could put $200k in 5 deals and make 5x on each and still lose $10m on one deal and have a negative return on an overall dollar basis but a great record on a deal times return basis. Similarly, you could make 5 small bets that fail but one that performs well to get an overall 3-5x return. At the end of the day lp's want to know if you made more money overall than their investment and if it beat their alternatives to deploy capital.

Re: Failure Rates In Early Stage Venture Deals

aaron — Fri, 30 Nov 2007 13:26:46 -0000

Interesting read.. /ac.

Re: Failure Rates In Early Stage Venture Deals

bernard lunn — Fri, 30 Nov 2007 13:01:18 -0000

This kind of transarency is so welcome in the VC world. I assume investors are comfortable with it because the numbers are good. For the entrepreneur it makes a huge difference to building trust and a productive relationship. One point of friction between entrepreneur and VC that I have seen is based on the fact that a VC is hedged by having a portfolio whereas as the entrepreneur's financial health is totally tied up in that one venture. So when a VC wants to "shoot for the moon" to get that 10x return, the risk to the entrepreneur needs to be considered. These issues are all toally resolvable within a relationship based on transparency and trust. Kudos to you for showing real leadership in making that happen.

Re: Failure Rates In Early Stage Venture Deals

Michael Simonsen — Fri, 30 Nov 2007 12:59:07 -0000

jeez Fred - you only made 6 investments from 96-98? You blew the chance of a lifetime! ;-)

Re: Failure Rates In Early Stage Venture Deals

Live Crunch — Fri, 30 Nov 2007 12:00:56 -0000

I just explained on Tech Crunch about the business plan situation, I mean you got to ask your self every single question before you even start business, people think that if somebody else did it why can't I ? Well that somebody

A. Got lucky ( cool domain name, had supporters etc.)

B. Wrote good business plan

C. Had backup plans

D. Layout the operational management structure.

~ Live Crunch

Re: Failure Rates In Early Stage Venture Deals

fred wilson — Fri, 30 Nov 2007 10:03:47 -0000

i think the average for early stage startups is 1/3, 1/3, 1/3. You have to be able to get 5-10x on your money on the deals that meet expectations for the numbers to work.

That's what drives valuations.

Re: Failure Rates In Early Stage Venture Deals

Thomas — Fri, 30 Nov 2007 00:06:00 -0000

Do VCs talk down their failure rates in order to justify higher equity positions? If the math really is 40% 40% 20%, then that might have implications for floor valuations VCs can accept...

Re: Failure Rates In Early Stage Venture Deals

Scott Lawton (Blogcosm) — Thu, 29 Nov 2007 18:26:59 -0000

Fred: great info, thanks! Hard data like this is very helpful for entrepreneurs.

Dan: sounds like a good subject for a post. (Or, include a link if you've covered it in the past.)

Re: Failure Rates In Early Stage Venture Deals

Dan Primack — Thu, 29 Nov 2007 16:58:58 -0000

Glad to see Jeff is teaching that class. I recently spoke at a b-school class going the other way: Teaching MBAs how to best deal with (albeit not become) the media. Something too few entrepreneurs, CEOs, VCs, etc. really understand...