Risky Business: All startup investments come with risk, but that doesn’t erase the need for strong founder fundamentals
Blog excerpt provided by JumpStart.
Written by Taher Hassonjee.
Anyone familiar with the venture capital industry knows that it is a high-risk, high-reward business. A startup that succeeds can make a lot of money for themselves and their investors. However—as the common VC proverb goes—for every one startup that hits it big, another nine will fail.
In reality, the numbers probably aren’t quite that stark. As a general rule of thumb, The National Venture Capital Association estimates that only 25-30 percent of venture-backed business fail completely. That means out of every 10 startups an investor backs, 2-3 will go out of business and 4-5 might return their original investment (or something close). This leaves one or two startups that will drive the vast majority of a funds financial returns.
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Originally published February 21, 2017.
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