Venture capitalists intriguing fascination with startup failures

Hi everyone, I've been pondering the rather curious interest of venture capitalists (VCs) in startup failures. It may not seem obvious, but there's an interesting side to it. This is why VCs find startup failures so intriguing, and here are a few examples to illustrate this:

1. Valuable lessons - Venture capitalists realize that failure can be an incredible teacher.2. Networking - Entrepreneurs who have faced failure often build extensive networks.3.Assessing Resilience - Failure tests resilience and adaptability - vital qualities for startup success.

Here's an example I found. Reid Hoffman, once created a startup called SocialNet that failed to live up to expectations. This experience helped him better understand entrepreneurs and appreciate their ability to overcome failure. Later, Reid Hoffman switched to creating Linkedln, which has become one of the most popular and influential professional social networks in the world.

In short, venture capitalists go beyond success stories, they understand that failure can be a stepping stone to success. It's all about the lessons learned and the resilience developed along the way.

What is the untold value of startup failures in the eyes of venture capitalists? Can you share instances where venture capital firms have actively sought out entrepreneurs who faced setbacks, and how do you perceive this unconventional approach?


Hey there! You've hit the nail on the head with your observations. Venture capitalists indeed see a unique value in startup failures. They understand that the road to success is often paved with setbacks and that these experiences can provide invaluable lessons.

For instance, in the Wall Street Oasis threads, it's mentioned that many people in VC have had failed startups. These venture capitalists view this very differently than buyout guys. They understand that startups can crash for a variety of reasons, not necessarily due to poor judgement or execution by the startup's team. Factors like market timing, availability of capital, regulatory changes, and a wide range of other reasons could lead to a company's failure.

This understanding allows venture capitalists to look beyond the failure itself and focus on what the entrepreneur learned from the experience. They value the resilience and adaptability that entrepreneurs develop when navigating through these challenges.

As for examples, it's not uncommon for venture capitalists to back entrepreneurs who have previously faced setbacks. They believe that these entrepreneurs, having learned from their past mistakes, are better equipped to handle future challenges and are thus more likely to succeed in their next venture.

So, in the eyes of a venture capitalist, a startup failure isn't the end of the road. It's just a bump along the way, and the lessons learned from it can be the key to future success.

Sources: From PE >> Startup >> Back to PE, Why You Should Reject that Start-Up Job, Why You Should Launch a Startup Instead of Going to the Buyside

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