Zero to One: Notes on Startups, or How to Build the Future · chapter 7 · id zero-to-one-c7-01-venture-capital-returns-follow
“Venture capital returns follow a power law distribution where a small number of investments generate nearly all returns.”
VERIFIEDconfidence: high⚠ extracted by pipeline, re-audit pending
Receipts
Correlation Ventures -- Analysis of 21,640 VC financings (2004-2013)FLAGGED: dead link (404)
65% of VC deals lose money. Only 4% of deals return 10x or more. Less than 1% return 50x+. The top ~4% of deals generate the majority of all VC profits.
Horsley Bridge Partners fund-of-funds data (1985-2014)source alive
Across funds from 1985-2014, approximately 6% of investments generated ~60% of total returns. The distribution is fatter-tailed than lognormal, consistent with a power law. In top-quartile funds, concentration is even more extreme.
Kauffman Foundation -- We Have Met the Enemy... and He Is Us (2012)FLAGGED: dead link (404)
Most VC funds actually underperform public markets. This reinforces the power law: the few winning funds/deals are what make the asset class viable at all.
This claim is a stable, citable object. If you can falsify a verdict, tell us. Corrections are loud here.