Tag: incentive prize competitions

In technology, change tends to be revolutionary not evolutionary. So you need to force yourself to place big bets on the future. -Larry Page Power Law Curve There is a tendency among less experienced early stage investors to think that the distribution of venture returns is linear — portfolio companies have an equal opportunity of failing, plateauing or growing. In reality, however, venture returns are incredibly skewed within a fund’s portfolio (as well as across venture funds). As Peter Thiel and others have discussed at length, the actual distribution follows a power law, with a few winners accounting for more returns than all others combined. Understanding the power law curve is essential to being a good venture investor, a difficult task given that most of us are accustomed to thinking linearly in our daily lives. Thiel attributes this curve to the compounding power of exponential growth that is typical of successful venture investments: Successful businesses tend to have an exponential arc to them. Maybe they grow at 50% a year and it compounds for a number of years. It...