The trends

1: VC isn’t for everyone.

Running a micro venture fund, I can more and more understand how VCs need huge outcomes to make any attempt at a decent return for their LPs.

The VC model makes it absolutely non-profitable to invest in any business which doesn’t have a very real chance of being a $100M+ business in a relatively short timeframe.

Oftentimes I’ve found myself saying:

wow, this is going to be an awesome business, but I seriously doubt it could scale past $5–10M in revenues.

If you think about it, that’s a crazy thing to say: an “easy” $5–10M business is amazing!

But the risk / reward balance is completely different from how we (and most VCs) set up our fund, where most businesses are expected to fail (because they risk big trying to become #1) and so the successful one needs to return the fund multiple times (eg return 50-100x).

This means that any business who structurally only has the possibility to become a $1M-$10M business, or is playing in markets who don’t enjoy massive margins and stellar growth, needs to find an alternative to finance itself.

And guess what, that’s 99% of all businesses in the world which are getting overlooked by VCs.