A short thread on Venture Capital.
1/ VCs are a portfolio of uncorrelated, risky bets that entrepreneurs take.
2/ Essentially VCs underwrite business risk - they let entrepreneurs take the risk that has a small chance exceptional returns.
3/ VCs don’t judge whether a startup would fail - they expect failure by default.

Rather, they judge whether a startup could become big.
4/ Because bets should be uncorrelated, good VCs are fairly wide in types of startups they fund.

Best VCs would fund consumer, SaaS, deep-tech or any other type of company.
5/ Many VCs seem to be focused on tech not because they love tech but because tech companies grow really big.

Remember: VCs are all about giving a return on portfolio via a few companies working out while most failing.
6/ Entrepreneurs who diss on VCs because they wouldn’t fund their company don’t understand that VCs are given money by investors to produce high-risk, high-return rewards.

For low-risk, low-reward returns, investors have bonds.
7/ It’s a bit unfair that an entrepreneur is expected to focus 100% of her effort on a company that will most likely fail while VCs hedge their risk via a portfolio.

But then what entrepreneurs get is the joy of doing one thing and building something.

You can’t have it all.
8/ That’s it.

The key thing to remember is that VCs are an instrument for investors to get high-risk, high-reward return.

And it’s a great way for society to fund innovations that wouldn’t exist otherwise.

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More from @paraschopra

22 Feb
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(a thread on this mental model)

🎉 It's also 11th chapter of my book invertedpassion.com/deliver-value-…
1/ Most markets are like the car market.

Some people like bigger cars, others like efficient cars and then there are some who like premium cars.

That is, markets aren’t homogeneous. They consist of different sets of people who value different aspects in a solution.
2/ Because different segments value different aspects, an improvement in one aspect will only be appreciated by that segment and get ignored by everyone else in the market.
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20 Feb
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(a short thread)
1/ In many developed nations such as Switzerland, interest rates have been negative for many years now.

This means you pay the bank to hold cash. How does that make sense?

2/ The key is that this is happening in most developed nations.

In these nations, investable opportunities are going down because practically their economies - roads, industries and so on - are built out.

Imagine you have money but nowhere profitable to invest. What happens?
Read 10 tweets
15 Feb
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(a thread on this mental model)

📕 It's also 10th chapter of my book invertedpassion.com/all-sophistica…
1/ There’s always a temptation to launch a fully built product with more features and capabilities than existing competitors.

It’s exciting to build the next Google, the next iPhone or the next SpaceX, isn’t it?
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No product arrives in the market fully fleshed out.
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13 Feb
Since many folks are tagging me on this thread, here’s what I think about it.

1/ The argument isn’t that bitcoin is entirely useless, the argument is that cost-benefit tradeoff for it is *worse* than current systems such as banking or the Visa network
2/ Comparing bitcoin’s energy consumption with Gold mining is a false comparison.

Once gold is mined, it exists forever. If gold mining stops today, no additional energy will be consumed but gold transactions will still keep happening.
3/ If bitcoin mining stops today, no transactions can take place.

So the bitcoin mining has to keep happening forever for bitcoin transactions to occur.
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12 Feb
Bitcoin is a virtual fortress.

(a short thread)
1/ I’ve started imagining bitcoin as a virtual fortress which is secured mathematically so that even governments cannot seize it.
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Is the 🌍 world becoming better?

(a thread exploring this question)
1/ This thread is my reflection on the #book Factfulness.

📚 I loved the book so I'm giving away 10 copies of it.

Retweet the thread and I'll randomly pick 10 people to send the book.

If you're a student without income, fill this form to get priority: docs.google.com/forms/d/e/1FAI…
2/ The key idea explored in the book is that the world has witnessed significant progress over the last few decades, but most people are unaware of that fact because they hold distorted views.
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