Quote:
Originally Posted by tetsuya
I think you'd be surprised how little VC/angel's make. It's only an average of about 30%, because more often than not they buy into failures. Furthermore, they are actually aiming for a 5-10x return not 50-100x. In fact, if it's close enough to exit, they'll take significantly less than 5x. Most of these shark deals already have proven sales. With the reduced risk, they don't need such a big payday when it hits. All they really need to do is beat the markets, so they would be ecstatic to be stuck with a mere "5-10x upside potential."
Though I have definitely seen deals made where there obviously wasn't much upside, I think the EZVIP has very good potential. No way they top out at 5m, if it's done right.
There's a number of other dynamics at play. Part of it is just a game. A lot of these deals never make it through due diligence, so what you see on the screen doesn't mean much; if you're a shark and you just sit there waiting for the big play, you're gonna get galfond'd; the sharks are there for ego, not to make money; they want to be seen making deals, both for the viewing audience and also the other sharks, etc., etc.
You can't convince me that these guys are aiming for 5-10x. They should be aiming for 50-100x, know that a number will fail, and that they net out around 30-40%. I mean you need a pretty good success rate if your homeruns are 5x to maintain those returns.
Yeah I just read the post about only 1 in 8 making it through diligence. That definitely changes the approach, and you're right, it is a game. These "sharks" are building their brand. I mean I certainly didn't know about Herjavec before this show and now I think he's a beast (at least he pimps out on his Twitter account). So I guess from that perspective it's smart to develop an image and put your money where your mouth is.
That said, i'm willing to bet that these are at the very minor end of these guys' investment portfolio, even of their angel portfolios.
Ezra
