Are venture capitalists really just another form of bookies and entrepreneurs the mark? While I’m not quite ready to make that argument, there is at least one person who thinks there are some similarities. Here is the exact text:
“Venture –funded companies attract talented people by appealing to a lottery mentality. Despite the high risk of failure in new ventures, engineers and business people leave their jobs because they are unable or unwilling to perceive how risky a startup can be. Their situation may be compared to that of hopeful high school basketball players, devoting hours to their sport despite the overwhelming odds against turning professional and earning million-dollar incomes.”
So now you’re thinking, that’s crazy, right? Clearly this came from someone who is not familiar with the subject of VC, and while normally you would be correct, in fact this quote came from Bob Zider, the founder of a very successful firm, and was published in the Harvard Business Review article that he penned. Kind of changes the mindset a little, doesn’t it.
So are those of us who are starting or running our own businesses better off taking our balance sheets to Vegas and putting it all on black? Well, maybe we are—with the eventual success of VC funded companies being only about 20%, statistically, we are better off on hitting the roulette table and going all in on red/black.
As for me, there’s no way I’m putting all of my money in the hands of the house. While I may only have a one in five chance of making it, I like my chances as a puncher with the entrepreneurs and will keep showing up to work until no one wants to buy what I’m selling.
As a side note the article by Zider titled, “How Venture Capital Works” is a great read. Check it out if you have a chance.
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