In order to catch the attention of VC financial commitment, companies must have a growing, significant addressable industry. In the Uber example, the TAM elevated 70x in 10 years out of a $4B black-car market to a near $300B cab marketplace. The startup converted clients and started out a network effect to lower costs since the company’s providers became most liked. In fact, Uber is expected to dominate the entire auto market as persons increasingly in order to ride hailing services rather than owning vehicles.

While there is not a single reason why a VC finance isn’t performing better than various other investments, there are various factors to consider. Many people don’t realize that 65% of venture capital deals bring back less hpcapitalventure.com than the first capital used. Behavioral economic analysts have shown that we tend to be more responsive towards deficits than people are to increases. Losing money could be part of a good investment strategy, but venture capital investment runs withstand to this trend.

While capital raising funds seek to invest in 10 startups in a single fund, half a dozen of these will not be powerful and eventually fail to give back the capital. On the remaining two, one or two definitely will generate a return on expense starting from 10x to 50x. Therefore, the ultimate target of VC investment is to create a organization with a potential to generate a return on expense of 10x to 50x its original investment.