> So it seems for investors, the big winners are simply based on luck...
That's not quite right. It's more a question of taking enough of the right kind of chances in funding the companies that you do fund, as opposed to all the companies you don't fund.
I think of it as the concept of "search space" -- you need to define your search space properly, so that you have a good chance of having some big winners in the search space. You have to define your search space because you can't invest in everything. The investors that do the best job of defining their search space (having the most accurate criteria, best judgment, best mental models, etc.) have the best chance of funding some of the winners -- almost as a side effect.
When you talk to old successful VCs, what they tell you is that they had almost no ability to judge which of the companies they funded would go on to be the big winners in their portfolios at the point of funding them. They only learned that later. The challenge was to get enough of the right kinds of risk "above the line" and then give the portfolio time to develop.
That's not quite right. It's more a question of taking enough of the right kind of chances in funding the companies that you do fund, as opposed to all the companies you don't fund.
I think of it as the concept of "search space" -- you need to define your search space properly, so that you have a good chance of having some big winners in the search space. You have to define your search space because you can't invest in everything. The investors that do the best job of defining their search space (having the most accurate criteria, best judgment, best mental models, etc.) have the best chance of funding some of the winners -- almost as a side effect.
When you talk to old successful VCs, what they tell you is that they had almost no ability to judge which of the companies they funded would go on to be the big winners in their portfolios at the point of funding them. They only learned that later. The challenge was to get enough of the right kinds of risk "above the line" and then give the portfolio time to develop.