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Vrishank Raj

Stealth • 8m

Pareto Principal or the 80/20 rule in the world of Venture Capital 👇 For those aware who are not aware of this 80/20 rule, it states that 80 percent of the returns will be generated by 20 percent of the companies in the portfolio. This is a pretty standard result in the VC industry where most of the returns are generated by only a few investments. Let's see the application of this principle on an Indian VC firm, known as "Blume Ventures". 👇 - For Blume Fund 1, the top 20 percent of the companies in their portfolio generated 98 percent of their total returns 🤯 - The total fund size was Rs.114 crore, their portfolio company GreyOrange alone returned them Rs.170 crore 🫡 - The top 20 percent companies in their portfolio generated them an avg of 16.5x return - 50 percent of the companies in their portfolio made them no return. This is why VC is often called the most high risk, high reward industry. The chances of your portfolio company failing is always high.

7 replies44 likes

Replies (7)

Anonymous 2

Stealth • 8m

I think VC is less risky cause if you invest 1 Cr in 100 startups, 2-3 will definitely return more than 100 Cr all together.

1 replies4 likes

Anonymous 1

Stealth • 8m

Also same happens in corporate teams. 20% of employees get 80% of the work done rest are useless.

1 replies4 likes

Arcane

Stealth • 8m

Any example where the Pareto Principle won't work ?

1 replies1 like

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This is how the VC ecosystem works. - People from Canada and the USA contribute their money every month to a pension fund with the aim of receiving a pension once they retire - The pension fund, aiming to generate returns, allocates its money to v

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Here's why the Pareto Principle, or the 80/20 Rule, is more of a guide than a guarantee. The Pareto Principle, or the 80/20 rule, states that 80% of the results come from 20% of the causes. This is evident everywhere. If you’ve ever been to a gym,