The investment track record for Venture Capitalists is not that great. Everyone knows that. Eight out of ten of their investments go south.
It is easy to get a “No” from a VC. Since they are always looking to cover their risks, one or two risk areas can prompt a “No” from them.
The big dilemma is how many ideas should they reject before they say “Yes” to an idea. I don’t know the number but the number has to be high. Here’s why:
Let us say a VC says “Yes” to three consecutive deals. It doesn’t look right because none of the ideas will seem to be uncommon. If an idea is not uncommon then naturally you should not expect uncommon results. In other words, they have to say “Yes” to an idea after only after rejecting MANY ideas so that they get a “feeling” that they have funded an uncommon idea.
In reality, however, a funded idea may not be an “uncommon” idea as 80% of projects that a VC funds will go south. Something is wrong somewhere here. But there is no way to figure that out easily. The easiest defense, therefore, is to keep rejecting a lot of ideas and chose one. That way, at least it feels that they have funded a “winner” out of many “losers” they have come across.Related Articles:
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