Re:Nobody is grasping the end of the 0 rates regime
by rufus_foreman on Friday December 09, 2022 @04:25PM
(#33926613)
A 5,000% annual return on a million dollars for 10 years is $119,042,423,827,612,787,802,112.
Re:Nobody is grasping the end of the 0 rates regime
by chewz on Friday December 09, 2022 @05:43PM
(#33927398)
It is 5000% on single bet out of 100.. And 100% loss on other 96 bets... Which makes VC's return on total capital much smaller then 5000%..
But more important high discount rate means much shorter runway for startups.
Re:Nobody is grasping the end of the 0 rates regime
by dragonwriter on Friday December 09, 2022 @06:44PM
(#33928038)
> They’re investing in startups that have the potential to get something like 1,500% or 5,000% returns on their money and many times, they eventually succeed
And many, many, many more times they fail. The higher the risk-free interest rate, the higher the returns need to be to justify high-risk investment unless, like SBF, you simply eschew risk premiums. But most sane people, even VCs, aren’t that risk insensitive.
VS’s aren’t in the game for a 4%, 10%, or even 20% return. They’re investing in startups that have the potential to get something like 1,500% or 5,000% returns on their money and many times, they eventually succeed. Sure raising money in a high interest rate environment will be harder but it doesn’t kill the VC model at all.