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.
Because VC returns are nearly a power law. The top 2-3 exits drive almost all the returns.
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Right! Much as with estimating how good a player in a tournament is. If you wanna know how good the player is, you'll do much better looking at their expected average winnings rather than actual winnings if the estimators are savvy. The expectation is based on way more data.
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The tournament result is one shot from a perfectly accurate but laughably imprecise measure of relative competitive chops. The people who scope out talent would have to be pretty bad at their job to be worse than that.
End of conversation
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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.