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Does venture capital attract fewer long-term oriented companies due to investing on the basis of short-term traction rather than importance of vision?

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JASON LEMKIN

This is a topic that people get partially wrong.

Venture capital invests in companies:

  • that can be worth $1b+ in
  • 10 years or less from the date of investment.

They have to, because venture funds are more-or-less structured as 10 year investment vehicles (with extensions possible, but 10 years nominally). And to make any real money, VCs have to at least try to invest in companies that possibly can be worth $1b or more.

Some really crazy stuff, pure science, can indeed take far longer than 10 years. Some funds are structured to accommodate that, but it is rare.

But 10 years is OK. Venture capital is reasonably patient. So long as the deal fits the economics and structure of the fund.

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Published on December 3, 2017
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