Why a few startups drive venture capital returns

Venture capital is a form of private equity financing where firms or funds invest in early stage companies for an ownership stake, despite high uncertainty and frequent failures. The lessons answer why a few startups drive venture capital returns and help readers understand how those outcomes shape a fund's overall results. They connect startup risk with the way investors think about returns across a portfolio.

2 articles, 1 book · about 59 min of reading and viewing

The reading path

1. Read
   Why venture capital returns come from a few startups · Wikipedia · 56 min read

   ARDC's 1957 funding of Digital Equipment Corporation (DEC) became a standout venture capital return: after DEC's initial public offering in 1968, it was valued at more than $355 million. The investment returned over 1200 times its cost, an annualized rate of return of 101% to ARDC. Venture capital's public successes in the 1970s and early 1980s, including Digital Equipment Corporation, Apple Inc., and Genentech, led to a major proliferation of investment firms. From a few dozen firms at the start of the decade, there were over 650 by the end of the 1980s, each searching for the next major "home run".

2. Read
   

   The Power Law in Venture Capital · patrickmenendez.substack.com · 3 min read

   In a simplified example where a fund invests the same amount in each startup, the top investment produces over 80% of the portfolio's returns, and the top two produce over 90%.

3. Book
   

   The Power Law · Bookshop.org

   The Power Law is a book by Sebastian Mallaby, published in 2022, on how the American venture capital industry developed.

Book links are Bookshop.org affiliate links. Curiate may earn a commission on purchases, at no extra cost to you — Bookshop.org also gives a share to independent bookshops.