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The dirty little secret that could bring down Big Tech (www.businessinsider.com)

submitted 1 year ago* (last edited 1 year ago) by [email protected] to c/[email protected]

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[–] [email protected] 23 points 1 year ago* (last edited 1 year ago)

Venture investing is the answer to the question of what would happen if you staffed a bank's loan department with adrenaline junkies.

Well, no. When a bank extends a loan, it knows the upper limit on how much money it can make from that loan. It might make less, if the debtor ends up defaulting on the loan; but it can't make more.

In venture investing, the upside is unbounded. The company might go to zero, but it might become the next Google; and the venture investor gets to own a fraction of that.