It’s OK. As long as the founders did everything they possibly could to make it work.  Everything.

There are two types of losses for VCs and professional investors:  losses than fit into your “expected loss rate” … and unexpected, and often, abnormally high losses.   The first is OK.  The second can be Game Over.

Statistically, every early-stage investor is going to see some % of her investment fail, and a large other % not really make much money.  As a true angel, your effective failure rate could be as high as 90%.  As long as there is one Uber in there — you’re doing fine 🙂  By contrast, late stage investors can’t really afford too much large losses at all.  Because the upside is also more bounded.

But net net in all this … investors know what they are doing.  They know the risks they are taking.

You should only feel bad if (i) if you were dishonest, or otherwise didn’t disclose key risks — you mislead the investors, such that they couldn’t 100% see the risks — or (ii) didn’t give it every ounce of your soul to make it a success.

When investors get hurt hard is when something isn’t supposed to lose money … loses a lot of money.  E.g., I write a $500k first into a start-up.  Then I put another $2m in.  Then $10m in a third round.  Then another $20m in the Series C.  Now we’re up to $32.5m.  In, say, a $250m fund — that’s a lot.  Just losing the first $500k?  Not a big deal in a $250m fund.  It’s OK.  Losing $32.5m now though — that’s a Career Ending Move.

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