Startup Gambling: Economics of Venture Capital – Company Forensics

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#startups #Slidebean #investing

The relationship between founders and investors is a weird, symbiotic phenomenon.
We, entrepreneurs, create companies, we work day and night, we lose sleep and get gray hair to see our vision through- and someone on the other side provides the funding, and just sits and relax while we make them money.

That’s just a rookie oversimplification. The reality is, most of the companies, most of the startups that you can think of, could not exist if it wasn’t for venture capital. That includes your Google, your Airbnb, your ClickUp, your TikTok, even your Candy Crush and your Telegram.

Garry Tan published a video the other day on how he turned a $300K investment into $2B.

(By the way, we offered Garry a seat in this video, but he didn’t want to).

Anyway, he invested in Coinbase, in their first-ever round of funding, and now that Coinbase went public his investment has multiplied over 6000x.

This is transformative, life-changing money. Tan went from entrepreneur to being worth a few million dollars, to being worth hundreds of millions, all with one accurate bet.

That is very much the investment thesis of venture capital. Most startups fail, everybody knows that. Most startups will fail. Experienced investors are very much prepared to lose their money because they are not looking for 1x or 2x returns on investment, they are looking for that 6000x, unicorn, life-changing win.

You would think that there’s a simple approach to it. I have money, I invest, I get money if the company succeeds- but there is a whole industry of venture capital, with layers of partners, limited partners, funds and legal structures- and most entrepreneurs come into this world having no idea how any of this stuff works. Many investors too, actually.

I had a broad idea of how it worked, but as I researched this video I realized how hard this info is to find and to understand. Luckily for you, we are good at getting complex things into simpler form. Shameless plug. Let’s get on with the video.

0:00 Angels & VCs – Intro
2:15 Angels & VCs – Who can raise this type of money?
6:15 Angels & VCs – Coinbase as our case study
7:51 Angels & VCs – Angel investors
13:14 Angels & VCs – Venture Capital funds
15:26 Angels & VCs – In-depth numbers, is this profitbale?

Read the video transcription + sources: https://slidebean.com/blog/startups-angels-vcs?utm_source=youtube.com&utm_medium=content&utm_campaign=ba-content

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