Judging from Rob Walling's thoughts on this topic from his book -- the equation looks different for the kind of company they're looking for. There's no "huge risk of failure"; the focus is on businesses highly likely to succeed that will have (relatively) slower, but consistent, growth. And obviously (relatively) lower final valuations.

Bingo. Instead of 1 in 20 becoming a huge success (100x) and the other 19 fail, maybe for us it's 10 in 20 are "base hits" that return 2-5x and the other 10 fail.

Those are contrived numbers for this example, but you get the idea. I expect more of them to be singles/doubles, fewer to fail than the typical VC bets, but we'll have no home runs.

What will allow you to get higher % of successes than a typical VC?

Have you seen the total returns of VC money? Too lazy to link stuff now but a perfunctory search will reveal that the returns are not what you think they are. They essentially approach 0% outside of the few powerhouses.

Can’t really use the Andreessen-Horowitz / Sequoia returns as representative to the entire industry.

Your evidence would seem to suggest that the TinySeed venture is very likely to approach 0% as well, no? Which is my concern exactly.

I think they are changing the definition of failure.

This shouldn't be downvoted. Changing the definition of failure is definitely what they're doing.

For a VC, anything that doesn't result in a liquidity event is a failure (in fact they might shut down an otherwise profitable company to sell off the IP and other assets for a pittance just to get it off their books).

TinySeed seems perfectly comfortable with no liquidity event ever happening, and just taking a cut of the profits.