Nearly Half of US Venture Capital Professionals in Middle To Senior Positions Have No Successful Investments (linkedin.com) 60
A study of 12,069 middle and top-level venture capital professionals at US firms between 1996 and 2025 found that 46% never achieved a successful investment. The research by Stanford professor Ilya Strebulaev and Blake Jackson classified directors, principals, and general partners as successful if they had at least one investment that either became a unicorn, exited at twice the entry cost, or went public. (The analysis deemed any investment with 2x return "successful," though one should know that in the venture capital industry, the majority of bets don't return anything and the model works because of power law.)
As expected... (Score:4, Insightful)
I've always told people in relation to "investment advisors" that if the advisors were any good, they wouldn't have a day job. I would take investment advice from Warren Buffett, not so much from the drone trying to reach me from Fidelity Investment Services.
Sounds like Venture Capital has the same problem - most of them make their money off of you, not off of their massive portfolio of successful venture investments. Kinda like There are venture capital firms that have shown good success over the long haul, but that ain't most of them. I'd invest with Andreesen Horowitz long before I'd invest with Affinity Partners.
not quite (Score:2, Interesting)
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VCs are not interested in companies that have a predictable healthy return.
They are interested in companies that will make them money, whether or not they have a predictable healthy return.
Venture Capitalists are not Financial Advisors (Score:3)
Sounds like Venture Capital has the same problem - most of them make their money off of you, not off of their massive portfolio of successful venture investments.
Absolutely wrong. Venture Capitalists and Financial Advisors do wildly different things. VC's really do make money off of their portfolios of investments. Or more accurately the 10% or less of a portfolio that is wildly successful. That is why they need to see a credible 10x return, according to their own well researched numbers.
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You're absolutely right that an individual Venture Capitalist makes or loses money off their portfolio. Long term, their financial success is based on both luck and how well they can judge future success of a venture.
You're absolutely wrong in that generally a Venture Capital Firm, especially one staffed with non-successful professionals, is NOT focused on making money off their portfolio. They exist to take capital from investors and distribute it to new ventures. And, of course, they need a percentage
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You're absolutely wrong in that generally a Venture Capital Firm, especially one staffed with non-successful professionals, is NOT focused on making money off their portfolio.
I said no such thing. To be clear, VCs do independent analysis and expect everyone one of their deals to be a 10x winner. They however acknowledge they will be wrong 9 out of 10 times.
They exist to take capital from investors ...
What do you mean by "investors"? VCs are the investors, or represent a private pool of investors.
They are the company selling shovels and pans to gold miners, not the gold miners themselves.
No. They are the investor buying shovels and pans up front for the miners for a percentage. They are not manufacturing shovels and pans, nor or they the merchant's selling shovels and pans.
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>>> What do you mean by "investors"? VCs are the investors, or represent a private pool of investors.
By investors, I meant the "private pool of investors". Andreesen Horowitz claims $42 billion of "assets under management". How much of that is AH assets, and how much is "private pool of investors" assets?
>>> No. They are the investor buying shovels and pans up front for the miners for a percentage. They are not manufacturing shovels and pans, nor or they the merchant's selling shovels an
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For most VC firms, my belief is that they're selling shovels and pans TO THE INVESTORS, who are trying to get in on the gold rush...
I think you need a new metaphor, "shovels and pans" are tools of those actually doing the work. Investors are not that. The folks you refer to are in the support infrastructure for those actually doing the work.
The startup companies are almost immaterial, other than they can be sold as a shovel or a pan.
They are not sold a shovel or pan. Investors buy them the shovels and pans they need for a share of their work.
Most VC firms aren't paying their CEO from investment returns; they're paying their CEO (and the researchers, salesmen, and janitors) from Investor's money.
IF true, this is part of the overhead costs of buying shovels and pans and getting them to the workers.
Again, just not a good metaphor choice.
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Financial advisors generally make money too. It's hard not to. The proper question is whether they make more money than a cheaper algorithm would.
Public market financial advisors don't. It has been demonstrated over and over, including at least one study using actual monkeys throwing things (which probably isn't cheaper, given how expensive lab monkeys are).
It's plausible that certain VCs, operating in markets they know a lot about, do. I doubt the average does though. The very fact that they talk about the
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The very fact that they talk about the "power law" implies the investment picking is no better than random.
Not random, low probability. 75% of VC funded project are a loss. Some percentage just break even. So the 10% "success" rate often stated seems plausible. Plausible as in the some "small" percentage pays for that 75% loss.
Keep in mind, VCs are not dealing with publicly traded companies. Getting listed on the "stock exchange" is probably one of their exit strategies. As is a private sale. So if are talking about "random" as in throw darts at companies listed on the stock exchange, the VCs have generally c
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According to TFA, 29% of the VCs made a unicorn deal. So failing a few investments, then making a unicorn can still be pretty great overall.
Apologies if I was not clear. That is their model, their plan. Every deal is expected to be a unicorn, but they know they will be wrong most of the time. Honest mistake. You can't win if you don't play the game. High risk, high reward, Etc, etc. :-)
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That would be true for partners - but most VC firms take money from investors (pension funds, wealthy individuals) and invest it in companies.
It's still wildly different than Financial Advisors. The VCs aren't working for a fee. They and any private investors are making money of off the investment in a speculative, unproven venture. To get listed on the stock market a company needs some track record of success. VCs get involved long before that point.
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I would take investment advice from Warren Buffett, not so much from the drone trying to reach me from Fidelity
It's likely both would be giving you pretty much equally boring suggestions.
Buffet's definitely not the one to ask for individual stock tips, and would most likely suggest low-cost S&P 500 ETFs whole market indexes, and possibly a few blue chips. The Fidelity guys would most likely suggest purchasing Fidelity Mutual fund shares that end up doing a fairly similar thing, but possibly with slight
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Useless "business people" (Score:4, Funny)
somewhat expected (Score:5, Interesting)
I had a VC guy tell me way back in 2003 that he would invest in 30 startups and expect 29 of them to fail but one to go big. He expected mostly misses and it was just a game of trial and error for him, he was already set and it wasn't all about the money.
Re:somewhat expected (Score:4, Funny)
Strange.
Why didn't he just invest in the one that would "go big" ?
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I'll bet there are countless investors that would like to use your crystal ball.
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It's available for parties and sex acts.
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Strange.
Why didn't he just invest in the one that would "go big" ?
Strange.
Why didn't he know the one that would "go big"?
Was probably too busy getting high to check his crystal ball.
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It's basically penny stock plays but with a lot more money at stake.
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I was in a Don Valentine backed startup in the early 80's (which eventually went [big] IPO). For a company that he was thinking of investing in, he had them send a prototype to us and we analyzed the tech for him. He invested in the 2nd company and it, too, went big.
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All bow to the Capital Allocators !
56% Made at least double. (Score:2)
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56% Made at least double on at least one investment.
If they made, say, a hundred investments, having one out of a hundred double is not great. (But it depends on what the others did, of course. If the other 99 lost all the investment, that's one thing, while if the other 99 did pretty good, but not double, that's another.)
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Thats not a bad gamble. I'd try it. So many focus on the negatives.
That "double" is mostly made from the successful 10% of their portfolio, the other 90% breaking even or losing.
12,069 (Score:2)
I'm surprised there are that many "middle and top-level venture capital professionals at US firms ". That seems to equate to a pretty large staff for a relatively small number of firms.
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That comes out to between 4 and 12 middle and top-level VC professionals per firm.
Real research requires staff (Score:2)
I'm surprised there are that many "middle and top-level venture capital professionals at US firms ". That seems to equate to a pretty large staff for a relatively small number of firms.
What you need to consider is that Venture Capitalists do an awful lot of research and analysis. They don't trust a company's numbers. They do their own customer discovery analysis. They do their own market analysis. They develop their own cost and revenue analysis, Etc. Yes, they do expect founders or a company to submit numbers. But those submissions and compared to internal analysis and are used to see if those founders and company execs did their homework properly.
All that requires staff.
If you are
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They don't trust a company's numbers. They do their own customer discovery analysis.
And even we non-investor types see plenty of evidence as to why that approach is necessary.
Invest in teams not ideas ... (Score:2)
They don't trust a company's numbers. They do their own customer discovery analysis.
And even we non-investor types see plenty of evidence as to why that approach is necessary.
The way my "professor" explained it is that VCs want to see your analyses, financial plans, etc to compare against what they come up with. They want to see that you made a credible effort at doing your homework. That, combined with the experience you bring to the venture is what sells them. Basically, they invest in a team they think can turn an idea into a successful product or service, not the idea of the product or service. Ideas are cheap and plentiful, successful teams are rare.
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On day one of "Venture Capitalist School" .... (Score:3)
And if you are not doing all that research and performing all that scrutiny yourself, then you are not part of the "smart money" Venture Capitalist Community. You are part of the "dumb money" Angel Investor Community, going with your gut and passions, and you will fail even more often.
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Everyone thinks the other side of the trade is "dumb money." Half of them are wrong.
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Everyone thinks the other side of the trade is "dumb money." Half of them are wrong.
VCs and Angels are on the same side of the trade. Both are investing. They differ in how they make the decision to invest or not. It's not uncommon to see both Angels and VCs invest in the same venture. Angels often getting on board earlier. VCs perhaps waiting until some patents have been issued, an MVP candidate is working, etc. Basically every investment rests on a large number of hypothesis, VCs want to see more proven hypothesis. Proven by data from customer discovery, data market analysis, etc. Less "
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What it makes me wonder is where the smart money is going. Let's say somebody is so "smart" they can consistently beat the market (perhaps because they have a stream o
Re:On day one of "Venture Capitalist School" .... (Score:5, Interesting)
Other people's money (Score:3)
Most of them are professional fundraisers, not investment specialists ... horses for courses.
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Exactly.
They aren't investors (Score:1)
It's one of the dirty little secrets of the stock market that we aren't supposed to think about. You're just supposed to trust the system.
You would want to be accused of questioning capitalism now would you?
Limited view of success... (Score:2)
How about, "better than breaking even"?
Hell, I hear ads all the time where financial planners (and the like) are touting 10% average returns as wildly successful. I guess they are in fact gross failures, as nothing less than 100% should be called success.
Monkeys are better (Score:4, Interesting)
1. Wall Street Journal Dartboard Contest (1988–2002)
WSJ ran a contest where journalists threw darts at stocks, simulating a monkey pick.
Over about 142 halfyear contests, professionals won 61 out of 100 contests. But that still means random picks beat pros 39% of the time.
Pros achieved a ~10.2% sixmonth average gain versus ~3.5% for the dart picks, and ~5.6% for the Dow. But differences weren’t massive, and bias factors existed
2. Research Affiliates & Cass Business School Simulations (1964–2011)
In one simulated test, 100 portfolios of 30 random stocks were built repeatedly. In 96 of the 100 simulations, random portfolios beat the marketcap benchmark index over 1964–2010
Cass Business School ran 10 million random portfolios annually from 1968–2011. They found that around 57% of random portfolios beat the market, though random picks underperformed ~31% of the time; top deciles did spectacularly well (returns over 9x original)
3. "Selling Fast and Buying Slow" Study
Although not monkeys, another experiment showed institutional investors were reasonably skilled at buying but poor at selling. Portfolios would perform better if selling decisions had been randomized. That means even human pros sometimes badly underperform compared to random sell strategies
rockwealth
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Summary Comparison vs VC Professionals
In venture capital realm, almost half of seasoned professionals never make a ‘successful’ investment (no unicorn or 2× exit).
In stock market simulations, random selection strategies often match or outperform active managers and—in some cases—beat the market 60%+ of the time.
That means an ape picking stocks at random can indeed outperform professional stockpickers more often than many elite VC pros exceed the odds of securing at least one big hit.
Final Thoughts
The monkey experiments illustrate how inefficient active management can be—especially after fees, biases, and behavioral errors.
While VCs rely on power-law outliers, stock managers rarely deliver consistent alpha. Random portfolios sidestep emotions and fees.
So yes: in stocks, monkeys (i.e. random picks) often beat humans. That’s no insult—it’s empirical evidence of broad inefficiencies in active investing.
Not unexpected (Score:2)
Middle are the people that do not have one. (Score:2)
That's how you become Senior - getting one of those deals done.
Senior should have one. If you don't you are probably a nepo-baby or something similar.
Middle that have a success should expect to be senior by next year. Otherwise they quit and look elsewhere.
Junior is being trained. They do the scut work.
Venture Capitalist = Gambler (Score:2)
The 10% are just lucky.
But that ignores the tremendous damage done by the model of buying companies with borrowed money and dismembering them for profit. Our health care system is slowly being made even worse by people extracting value out of it rather than adding any value to it.
Those who don't have a clue shouldn't be in VC (Score:2)
Why would they put money into a company when these people working for a venture capital firm have no clue about the field the company is involved with? If you don't understand technology, then putting money into technology companies is going to be a pure gamble, and chances are, will result in a loss of your money. These Wall Street types(including those connected to venture capital) really have no business talking about areas they have ZERO knowledge or understanding of.