Abree Murch AVG Blog October 18, 2019

Venture Capital Diversification

What Sea Turtles Can Teach Us About Venture Capital Diversification



What Sea Turtles Can Teach Us About Venture Capital Diversification

Baby sea turtles are born into a dangerous world. Each clutch of about a hundred eggs will endure a never-ending gauntlet of hungry birds, deadly waves, and deep sea predators. Only 2% of these young reptiles will ever make it to adulthood.

Like the sea turtle, startups face many obstacles to survive. The US Department of Labor estimates the survival rate for small businesses to be 80% after one year and roughly 50% after five years.

While the odds against sea turtles might seem insurmountable, the number of eggs they lay has decreased their risk of extinction and contributed to their proliferation over millions of years. This same principle can be applied to your strategy of venture capital diversification.

Diversification is the Hallmark of Good Investing

Venture capital is both a science and an art. It’s a high-risk asset class, but a prudent investment strategy focused on a large number of investments can minimize your risk of bad bets and increase your chance of returns by finding outsized winners.

How to Survive and Thrive in Venture Investing

Check out my white paper, How Many Eggs in a Venture Capitalist’s Dozen?, for an in-depth examination of how making many bets and spreading them widely is the best way to survive and thrive in venture investing.

 


ABOUT THE AUTHOR

Cainon Coates, Senior Principal at Castor Ventures

Cainon has 10+ years’ experience in finance, venture capital, and entrepreneurship, having worked at Boston Consulting Group and PBM Capital Group as well as serving on the founding team of five startups. At BCG, he worked in their private equity practice to conduct due diligence across the semiconductor, transportation, and medical device industries. At PBM (a $500M healthcare-focused venture capital firm), he led investments and worked as an operating partner within portfolio companies (including Human Design Medical, Revive Pharmaceuticals, and Triangle Research Labs). Cainon is a co-founder and advisor of Viafy and was previously a co-founder and CEO of University Laundry (acquired by a national operator and now part of Proctor & Gamble’s marquee Tide brand). He has an MBA from MIT Sloan and a BS from the University of Virginia in Systems Engineering.

 

Jakob Owens



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