Understanding Risk

The base rate matters more than any individual story. Across large samples, most venture-backed companies return less than the capital invested in them, and a meaningful share return nothing at all. Any framework that does not start there is selling something.

Losing your entire investment is a normal outcome, not an edge case. That is why experienced investors size individual positions small enough that a total loss does not change their financial position, and why they treat private investing as a long-horizon allocation rather than a savings vehicle.

Risk in private markets also compounds across dimensions: the company can fail, the round can be structured against you, the position can stay illiquid indefinitely, and later financings can dilute you substantially. Each is survivable. Together they argue for humility and small sizing.