Fundamentally, venture capital is the business of identifying & believing in ambitious people who need someone to believe in them. The greater the extent to which they're underestimated, the more you stand to gain — why is this *never* articulated?
I'm a bit skeptical of this frame: AFAICT, supersized funding rounds appear to be "required" by top-returning startups because top-returning startups are the ones willing to force extremely accelerated growth on themselves. They wouldn't necessarily have failed on less funding.
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Of course, VC will miss some great stuff, and it's probably more likely to miss stuff that's super expensive to prototype and/or take to market at all. But those bets *do* represent a higher risk, and especially for the littler firms, that might be getting priced in accurately
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I'm not in VC so this is just my outside perspective, but it seems true to me that most of the "successful" startups that get the huge returns needed multiple rounds of funding from multiple VC firms. That appears to be the outcome that gets the best returns for everyone (1/)
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