If Venture Capital Firms Were Surgeons They Would Kill 75% Of Their Patient—VC Needs Rethinking



Because VC money get many new products to the public that usually helps us or enrich our lives in some ways, their success rate Is everyone’s concern as it ultimately affects the world in varying degrees! For over four decades Venture Capital firms have had the same lousy investment failure rate, if they were surgeons they would kill about 75% of their patients and this would not be acceptable for surgeons, why is it acceptable with VC firms? Just as bad of the 25% that make it about 10-15% barely return money or break even. Are VC investors not owed the same level of care demanded of a surgeon? Should we not fix this very fixable problem? What profession can get away with a 75% failure rate over decades without being questioned?

I know that investing on startups is very risky, but there needs to be a method that greatly improves the accuracy of the bet venture capitalist make. For that matter most investors’ accuracy needs to be improved, but specially VCs because most invest in later stages where the business is mature enough to make a better assessment and their risks have been reduced by the angel and other earlier investors who really did take a much higher risk on an unproven concept. By the time most VCs invest the concept is well developed, most pivots are over, and the concept has some kind of prototype and in many cases some early success. With all of this it should be far easier to bet better. We talk about bets but really it is not a bet, so much is already known and so much can be measured and quantified that it should really be a pretty solid rational decision to invest based on the measurable quantity of success factors that are available. We apply measures to just about everything and big data exists for startups and investments as well; rich actionable data and we have so many data analysis models and startups that can really make VC investment improve by at least 20% if not much more. In some cases it can be way more and almost a sure bet.

I am not an expert on VC or financing, far from it, but I do have many ideas which I know can improve the odds of the investment right away—sometimes outsiders can see what “experts” cannot! I am sure there are far more knowledgeable and capable startups that can tackle this problem. It might be a large project but I call for some Startups to tackle the problem because it is a solvable problem and there is soooh much room for improvement and each percentage of improvement saves millions that Startups can make a great deal of money tackling it. Aside from startups there are many measure that VCs can take right away to tackle the problem and begin incremental improvements. While there may be some counterintuitive findings from combing through the data there are some intuitive measures VCs can take right away. I can see an entire funnel filtering system that can be started right away to open the gates to everyone (and make access far fairer instead of the cronyism that now exists) and weed them out on a relatively automated basis until they are deemed worthy of low level human attention to squeeze them through the final phases, then finally come out at the other side being worthy of investment.

If surgeons failed this much they’d likely go to jail and certainly lose their license—ever heart of the phrase “It doesn’t take a brain surgeon”? If Nasa or Space X failed this much they would not exist, ever heard of the phrase “it’s not rocket science”? These fields and many more are stupendously difficult to succeed in especially when a failure rate of more than 5% is seldom acceptable. So if Space X can send us to Mars in 15 years, how can we accept VCs having such a high failure rate? No industry can be allowed to have such high failure rates. Imagine if banks had that failure rate (and theirs is still high), we would not have banks; VCs success rate can be improved a great deal and we should try because their investments affect the world and fund project that shape our future so we all have a stake in what VCs do and how well they do affect our future! Imagine how many more startups can be funded if billions are saved even with just a few percentage of improvements? Each additional project funded touches many lives and greatly increases the prospect for everyone’s future as their product affect our lives!

 

 

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