These numbers will remind you that doing a startup is brutal

These particular numbers don't remind me that doing a startup is brutal. They tell me that investing in a startup is quite brutal, but doing a startup is about so much more than the money and the (potential) exit. If the possibility of failing was a reason not to do a startup then no one would ever do a startup.

To have the opportunity to work on an idea that you're authentically passionate about, that you truly believe in, that gets you out of bed in the morning and keeps you awake at night, even at a poverty level income, was completely worth it (for me). I have a litany of failures behind me and absolutely no regrets. No personal regrets anyway. I'm sorry that I failed the people I've employed and I'm a bit sorry that I've lost investors some money, but I'd do it again in a heartbeat. Hopefully without failing this time.

Some personal numbers, from 4 years at a SV startup (now at a larger company, couldn't take it anymore)

Over four years:

Total compensation: 80K (10-99) Debt: 8K Credit Card, 25K IRS Equity: ~1% (worthless probably, at most 50K)

Not worth it.

"Expara probably paints the most accurate picture since it’s been around longest. 13 out of 16 of its investments from 2007 to 2011 were written-off. That’s a failure rate of 81 percent."

Am I reading it wrong? In the chart it says 27 total, 13 dead. So around 50%.

"Douglas Abrams, CEO of Expara, explains that its two full exits made 2 x and 36 x the invested capital, while one partial exit earned the firm a cool 246 multiple. That’s a staggering average return of 95 x."

This seems like shaky math as well. What about the others that returned 0x?

The part that I find scandalous isn't that businesses have a high failure rate. That's been true since antiquity. It's that VCs are, to a large degree, responsible. They don't have to play get-big-or-die. There will be a nonzero failure rate no matter what, but it doesn't need to be this high. To a large degree, it's the VCs' fault for pushing their companies to take unreasonable risk. Often, worse yet, that risk is often counter-innovative... it's not creative risk but "hire 200 people next year and do Pearson's grunt work in large amounts" risk.

At the low end of the risk spectrum, you have small consultancies with minimal overhead and businesses with secured assets that you can take bank loans for. At the high-risk, high-growth end, you have companies that will either be 100 times their current size, or dead, inside of 3 years.

The mid-risk, mid-growth businesses, targeting 20-60% annual growth, tend to be too risky for bank loans but not interesting to VCs. Those will be 5-10x (at 10 years) most often with an occasional 200x, but rarely a 10,000x.

The thing is, the goal of the game shouldn't be to maximize your chances of getting (extremely rare, and difficult to get in to) 10,000x's. It should be to make money. If you can do that with a string of 5-10x results and a lower (say, 30%) failure rate, instead of swinging for 10,000x and having a 90% failure rate, then maybe you should. Not only are those 10,000x's rare no matter what you do, but unless you're extremely well-connected you're not going to be able to put more than a small amount of money into them.

Why is the Valley like this? Ultimately, it's not about making money. It's about the VCs' careers. You get a lot of credit, as an individual, for having "been in on" Facebook or Twitter. It's difficult to predict the successes in advance, which is why you get the creepy co-funding culture, which doesn't make money for anyone (in fact, they make less money because of it, because they fund lower-quality stuff) but spreads around the career credit of being an early investor in something that hits big.