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Comment by tptacek | Hacker News Reader

It feels dismissive to write this, but:

Every VC I've ever talked to --- middle double digits over 3 different startups --- has told me this story about how they're not looking for "10-baggers" or "unicorns" or whatever it is they're calling them these days. They want to invest in founders, trust that a good team will come up with ways to make money if they just stay out of the way, &c &c zzz.

The fact is that the economics of venture capital pretty much depend on most/all of a portfolio's investments having some shot at becoming outlandishly successful. The winners have to pay for the losers.

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The two aren't mutually incompatible.

If you're an early-stage investor you don't look for unicorns not because you don't want them (you obviously do) but because you can't spot them based on business model, traction, etc.

As an early stage investor you focus on team/founders because that's the best early predictor that a company will become a unicorn in the longer term.

No no no.

According to people commenting here, it's not the team or founders, it's luck.

So you need a way to identify luck. Then you're golden!

That's not the message (most) are conveying. The formula is:

Great team + great market = great business (for some definition of great, almost always < 1bn)

Great team + great market + luck = billion dollar business.

Nobody is saying luck is sufficient, just that it's necessary. As is talent, hard work, &c.

The role of luck ("fortune", "fate") in the success of great people is a deep and ancient question, and you should not dismiss it. Machiavelli's Prince is at least 50% about the subject, and Sun Tzu is infatuated with it. Acknowledging luck does not mean dismissing the successful - it's just intellectual honesty.

I can understand how a very logic/scientific mind could have difficulty with the concept of luck. Citing literature may not help.

Let's say there's some stochastic mechanics at work, randomness more than 'luck'. Luck is the attribute of someone, when randomness is an attribute of events, which makes a big difference.

Of course I can understand people citing 'luck' as necessary... but it's more superstition than science.

All in all, it means you can't really know for sure...

You're right, "luck" is a bad word because some people do have the notion of luck as an attribute.

It's not exactly the same as a stochastic variable though. It's really any forces that you cannot influence, control, or anticipate.

I readily, happily accept that dedicated seed-stage investors, "angels", whatever we call them today, have different incentives and selection processes than "venture capitalists" in the Greylock sense.

I'm a little unclear on how the economics of seed-stage investors interlock with those of venture capitalists, and what level of influence VC decisions have over the whole ecosystem. But from the vantage point of a founder, modern seed stage investors seem like an unalloyed improvement.

well if you subtract the unicorns VC industry is basically a money loosers. Now considering that 80% +/- of unicorns were funded by Sequoia & KPCB.

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