This is Harry DeMott's Typepad Profile.
Join Typepad and start following Harry DeMott's activity
Join Now!
Already a member? Sign In
Harry DeMott
Recent Activity
Great post. Most people have little understanding of nor think of the economics of the underlying investors. What is interesting for LP's is that in order to make the most of a fat company - they need to participate equally in the fattening of the company - which is great if the company starts thin and gets fat because they are making progress - but of course given any sort of positive outcome - the later round investments (assuming all up rounds) are going to produce lower returns - but perhaps excellent risk adjusted returns. On the other hand, thin companies can produce great returns on capital - and great multiples of capital - but with so little capital employed - gross $'s returned are going to be lower. This debate gets into the question of just how high the returns on the thin winners will be - and just how many winners employers of the thin route will bring. VC is pretty much a slugging percentage game - and not a batting average game - so what you need as an LP is a slugger who manages to hit it big when they have an opportunity to fatten up a company. Everyone can point to EBAY which was a thing start-up and a huge return - and others - but the more likely case is a much smaller return off a much higher capital base. You hope for a Google - but you get a 3 bagger - that's the reality if you are lucky.
Toggle Commented Mar 25, 2010 on Fat Startups, BMI and The Lorax at Super LP
Harry DeMott is now following The Typepad Team
Mar 24, 2010