Often, when an entrepreneur pitches his/her company to a venture capital associate, the first instinct of the associate is to point out all the shortcomings in the entrepreneur’s pitch. At the initial stage, the only thing that matters is to decide whether the opportunity in front of the startup, or the problem that the startup is trying to solve is big enough.

A startup may do a lot of things wrong and fail or even if it does a lot of things right, it may still fail due to factors out of its control. But when a startup succeeds, it produces outsized returns. Consequently the venture capital industry is a power law driven industry. A small percentage of successful startups drive most of the returns in the industry.

In this power law context where there are more mistakes committed than things done right, it is important to pick opportunities that even if a startup fails, it’s worth failing in.

Often companies with a lot of buzzwords in their initial pitch are not opportunities worth failing at. A company with a liberal dose of AI, blockchain, big data etc. in its pitch is usually a red flag about the opportunity size.

Opportunities worth failing at are also often difficult to understand at the outset as these companies are often creating a new industry or creating a new market segment than trying to take a piece of an existing crowded market space.

In some of the future posts we will list some such opportunities.

When opportunity comes knocking at the door, break the door open if it seems big enough.