Venture capital is a power law business

• Venture capital returns are not normally distributed; they follow a power law.
• A small number of companies in a venture capital portfolio will generate the vast majority of the returns.
• Most startups fail, but the few that succeed do so on an exponential scale, more than making up for the losses from the failed companies.
• This is why venture capitalists are not looking for companies that will provide a modest return; they are looking for companies with the potential for exponential growth.
• The Power Law governs the universe