What you describe is a basic application of the Kelly Criterion: https://en.wikipedia.org/wiki/Kelly_criterion

It helps you determine how much of your bankroll you can wager depending on (1) the odds, and (2) the size of your bankroll. It's the same reason why you shouldn't (mathematically) play the lottery (when it's expected value is actually positive) unless you're already filthy rich. The same math applies for hyper-risky startup investing.