[waterhouse]

Well, it depends on the numbers involved. If they estimated a 5% chance of getting $2 billion, then that would be a 2x expected return on a $50 million cost, which is entirely rational for investors with huge pockets. But if they estimated a 1% chance of getting $2 billion, then that's a 0.4x expected return (an expected loss of $30 million), which is irrational, unless the "embarrassment" is a significant factor for the VCs, and that would be interesting.

[Natsu]

Yes, that's a fair point--the numbers for the potential upside and downside matter a lot here. I was only trying to make the case that in some cases, the downside risk may not hold a candle to the potential upside.

I also think that they want to see founders who are willing to charge up those hills rather than to shirk away from challenges that seem to be too big for them. Sort of like burning your ships behind you in terms of morale--if it's go big or go home and you can't go home, there's only one choice left.