I've been trying to understand the very basics of venture capital, as a relative finance-illiterate. Some stuff I've learned from looking at return on investment numbers:
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The S&P 500 has a mean return on investment of about 10% a year. (It depends on the size of your window for the moving average, as of course the stock market will go down in recessions.) This is the return you'd expect on average from investing in an index fund.
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So the first question I asked is the dumb-and-obvious one: "do VC's, as a class, actually do any better than an index fund?" The answer, reassuringly, is yes; there's a lot more variance in VC returns, but in the long run early-stage VCs make about a 20% yearly return.
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(source: https://www.cambridgeassociates.com/wp-content/uploads/2015/05/Public-USVC-Benchmark-2014-Q4.pdf …)
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Replying to @s_r_constantin
I haven’t looked at this source, but something to be aware of is that investment returns in high-risk areas are often massively inflated by survivor bias.
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Ah, I see this is where you were heading...
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