[icelancer]

>> For VCs, this kind of return is abysmal since it won't cover the 7/10 companies that went completely bust.

Only very myopic VCs would think this way globally. If every business did this, it would be terrible. But each business is its own opportunity/set of circumstances, and forcing everyone to 10X+ is as equally stupid as cashing out $1MM on a four year term sheet on $2.5MM invested.

You must evaluate each opportunity individually to maximize profit and growth. The intentions can always be to shoot for hypergrowth, but if the probability drops below the profitability point, you shouldn't be forcing the issue. Terrible investors do this, and it happens fairly regularly, though it's slowing down as founders become a bit more intelligent with their options.

[mmt]

> Only very myopic VCs would think this way globally.

Might this be a (converse version of a) No True Scotsman fallacy?

Elsewhere in the thread, a comment [1] referenced an article [2] that details the return imperatives that VCs face. In particular, it details how small returns "don't move the needle".

OTOH, the article asserts that only 5% of VCs (misleading, if a percentage of number of firms instead of AUM) succeed in meeting this imperative, so I wonder how the other 95% still attract enough LP money.

[1] https://news.ycombinator.com/item?id=17872045

[2] https://news.ycombinator.com/item?id=17874278 https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...

[icelancer]

>> In particular, it details how small returns "don't move the needle".

You never want small returns. But when you can choose a small return over basically a near-zero chance of losing all your money, it isn't that difficult of a choice - or it shouldn't be.

[mmt]

The point is that, to a VC, a small return is indistinguishable from losing all the (not "your", since they rarely have much, if any of their own money in it) money.

Given their economics, VCs have a very strong incentive (or an imperative, according to that article) for "forcing everyone to 10X+" (and I would argue it's more like 20x+), no matter how small the likelihood of that outcome. Without at least one outsized exit, they're a failure.

Put another way, their LPs aren't paying them to, in any way, play it safe. Near-zero chance isn't the same as zero.

So, yes, the choice for a typical VC isn't difficult. It's just the opposite of what you're proposing.