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0 pointsgraycat13y ago0 comments

The "chances", that is, the probability, is close to irrelevant. Instead what is just crucial is the conditional probability conditioned on the information one has. Even if the probability is low, with suitable extra information the conditional probability can be quite high.

You understand: You saw the move 'Wall Street', right? So, what was the probability of a big move up of the PA steel company? Low, right? "A dog with fleas". But the conditional probability given that the takeover guy's plane was flying to PA was quite high. Got it now?

Again, yet again, to repeat just for you, from my three examples in my post, it's possible to plan effectively, even for advanced projects, and then perform according to plan with relatively low risk.

On picking winners, VCs don't try very hard to evaluate projects. E.g., recently a VC told me that he sees a lot of projects that currently have $2000 a month in revenue. Thus he missed the point: No doubt at one time each of Apple, Microsoft, Google, and Facebook had about $2000 a month in revenue. What is just crucial in picking "winners" is essentially to f'get about the $2000 a month and look closely at the project. VCs don't like to do that. Moreover, in recent years in information technology projects, VCs just don't want to believe that there could be any advanced, solid, unique, powerful, valuable technology difficult to duplicate or equal to be evaluated. Evaluating technology and projects just isn't how their business model works.

On my startup experience, you were guessing and guessed incorrectly.

Are you writing for Mark?

0 comments

dasil00313y ago

Yeah, I "get it". Sheesh, no need to be so fucking condescending. If it's so easy to pick winners why aren't you doing more angel investing instead of complaining about hot air from VCs?

graycatOP13y ago

Here is an explanation of some of the 'difficulty in picking winners': A lot of entrepreneurs try projects, and, right, maybe only 0.5% get an exit 150+ million. But a point is that, how many of those efforts were actually well planned? Not very many. Of the well planned projects, the chances should be much higher. Again, to pick good projects, have to use a lot of information, more than can use when just playing a lottery which, in effect, the 0.5% number assumes.

More generally, the goal is something exceptional. Can't get much insight into that looking at what was not exceptional. But there are some good guidelines for being exceptional. Yes, there are not many examples among the famous IT successes. From this you can conclude either that the path to being exceptional doesn't work or that there are good opportunities.

Whatever the entrepreneurs are, it's easy enough to identify the several dozen well known venture partners. Sadly, for the well known path to being exceptional, they are not and, really, don't have the backgrounds to do the evaluations. E.g., they are not much like the problem sponsors at NSF, NIH, or DARPA or leaders of significant, advanced projects at major labs or businesses.

So, again, the VC business model is not following all the promising paths to success.

For me, this isn't about me.

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