There's a more-or-less useful adage in investing: scared money don't make money.
Startups will always carry a risk, and VCs are not betting that the company will be asymptotically good, just good enough to make an exit.
Startups will always carry a risk, and VCs are not betting that the company will be asymptotically good, just good enough to make an exit.
This is a misunderstanding of VC investment. Any competent VC expects most of their investments to go to zero. They're hoping a small percent of their investments will make up for the losses. The goal of a decent VC isn't to avoid bad investments so much as it is to make sure they get one good investment. A good investment in AirBnB/Google/Facebook will make up for dozens of speculative bets that go to zero.
I'll be doing a linguistic nit pick now, as I felt it was a bit harsh to label my statement as a misunderstanding.
The bet is still on each investment to have a good exit. With the implied assumption that betting is a probabilistic game.