What would failure-rate adjusted valuations of startups look like? VC-firm-level returns are meaningful, but it’s weird that individual valuations are a vanity metric. Valuation: price at which you sell a % to a private group that is expecting median investment to be worthless.
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Why is the median more meaningful? It's more likely, but the average also carries information. Using actual results means using one shot from a distribution that has tautologically perfect accuracy but very low precision. Estimates are high precision, but potentially inaccurate..
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Because VC returns are nearly a power law. The top 2-3 exits drive almost all the returns.
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It’s basically BIRGing *average* returns in a power-law sector where *median* returns are more meaningful but far less flattering.