In praise of failure
In most jobs and most industries, if you do something that doesn't work out, that's a bad thing, and you might get fired. If you write a cover story for a newspaper that turns out to be untrue, you have a problem. If you ship a product that breaks, you have a problem.
If you do something that doesn't work out, that means you screwed up.
Startups and startup investing don't quite work like this.
Last year Horsley Bridge (one of our LPs - investors in a16z's funds) shared some aggregate data with us on just over 7,000 investments made by funds in which it invested, from 1985 to 2014. This gives a good way of visualising the world of VC-backed startups. First, the high level:
- Around half of all investments returned less than the original investment
- 6% of deals produced at least a 10x return, and those made up 60% of total returns...
...Digging into the data to look at the returns of different funds, below:...MUCH MORE
- With the exception of funds that simply flamed out (concentrated in the dotcom bubble), everyone lost money on around half of their deals