Three Realities About Venture Capital

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The Reality of Venture Capital

Venture capital is very small, kind of weird, and doesn’t even perform that well. It’s a wonder why any country would want to build up this industry, and yet, governments around the world are putting in huge incentives to create VC industries in their nations. The main reason is the other side of results: the number of VC-backed companies that eventually IPO is significant, and who can argue with household names like Microsoft, Apple, or Google?

What then about Yo? I think the key message here is that different venture capitalists have different risk tolerances and desired areas of investment. It shouldn’t be surprising that after healthy returns from a number of social networking companies that investors are willing to put a bit of capital into a fresh startup that could one day make it big. And frankly, $1.2 million is a pittance of the more than $8 billion raised last year for the VC industry (note: the money likely came from angels and not funds, and thus is not even included in this amount). Investors build portfolios, not one-off dreams. Given the success of the app today in the App Store, maybe they were on to something in the first place.