Finding Genius: Venture Capital and the Future it is Betting on

Out of more than 21,000 venture financings from 2004 to 2014: 65% lost money. Two and a half percent of investments made 10x–20x. One percent made more than a 20x return. Half a percent—about 100 companies out of 21,000—earned 50x or more. That’s where the majority of the industry’s returns come from.

Research done by Correlation Ventures found that about half of all the capital invested into venture-funded companies exiting over the last decade lost money, while less than 4 percent generated a 10x or greater multiple.

Out of more than 21,000 venture financings from 2004 to 2014: 65% lost money. Two and a half percent of investments made 10x–20x. One percent made more than a 20x return.

Venture capital funds, at the other end of the spectrum, are commercial organizations whose business it is to find the 5 to 20 companies each year that they believe have a chance of being one of the only 80 companies a year that will ultimately exit in a sale of over $50 million. Because funds are highly visible and listed in the phone book, every

However, investing in a higher number of billion-dollar companies does not necessarily mean a greater success level for a VC firm, as measured by return of the fund. Some firms may have larger fund sizes and hence invest in more companies. Some don’t lead deals and are not ownership sensitive. Analyzing what percentage of a firm’s bets that became

less than 1% of new businesses started each year in the U.S. receive venture funding, and total VC investment accounts for less than 0.2% of GDP.