New beginnings are often disguised as painful endings” — Lao Tzu . The hats have been thrown in the air. The corks have been popped in celebration. The tears have been shed in farewell. This has come to an end, and I have said my goodbyes to 90 people who have become as close as family, and of the great things they will do — . Graduation magical year in sadness in anticipation Change Lives, Change Organizations, Change the World Considering the impact that venture-backed companies have had on the economy, it’s no surprise that the Stanford GSB feeds more entrepreneurs back into this innovation ecosystem than any other business school ( ). In their 2015 paper , from UBC’s Sauder School of Business and Stanford GSB’s showed that only 0.9% of companies in US history have been backed by VC financing, but they comprise 17% of public companies and 44% of R&D expenditure today. Looking at modern times (post-1974), the numbers are even more staggering: 15% of the graduating class The Economic Impact of Venture Capital Will Gornall Ilya Strebulaev This is especially impressive when you consider that only 0.31% of new businesses receive funding each year: a pretty good for the , in aggregate at least. Just like most statistical distributions, the 80/20 rule applies to VC financing. According to the 2010 study on by Harvard Business School Professor , this great economic success is a result of only 15% of funding! A 2014 study of venture returns by over a 10-year period shows just how skewed the returns are ( ): venture ROI $60B in annual VC funding Risk and Reward in Venture Capital Bill Sahlman Correlation Ventures Courtesy of Fenwick & West LLP If you want to hit home runs, you’re going to — they don’t call it for nothing, just like options trading . While the lure of the draws in the dreamers, and the ire at the draws , as Thomas Piketty described in , the mean that this is exactly how the game is played. strike out a lot too venture the name of the game is risk top 1% bottom 1% equal media attention Capital in the Twenty First Century incentives of capital investment The natural human inclination is to judge. It’s easy to come up with a list of pros to support why venture is great or a list of cons to attack why it’s not. The more interesting question to me is BHAG what can we do to improve it? How much value is left on the table with those 70% of distressed companies? Why are they failing? What happens to them? What was their success criteria? How sustainable was their burn rate? How long was their runway? How many could have had a positive outcome if privately-held, without the return expectations of venture financing? You have to kiss a lot of frogs to find a prince — how many frogs do you have to kiss to find the blacksmiths and carpenters? Can we find new beginnings from painful endings? This article was originally published on Jun 28, 2017.
