If they invest at a company 100k at a cap of of $3mil and discount of 20%, then they will effectively 10X their returns if the company sells for $30mil.
Now if they invest at a company founded by experienced entrepreneurs that has same traction as the previous company, they might have to put-in $1mil at a $10mil cap and they’ll need the company to have an exit of $100mil to 10x their money.
I haven’t looked at the data personally but my hypothesis is inexperienced founders and $30mil exits are more likely than over $100 mil exits with experienced founders. It’s far more likely to sell for $30mil than it is to have an exit upwards of $100mil. So while a n experienced entrepreneur will be more likely to have an exit at $30 mil than an inexperienced one, it won’t produce the same returns for the investors
Now if they invest at a company founded by experienced entrepreneurs that has same traction as the previous company, they might have to put-in $1mil at a $10mil cap and they’ll need the company to have an exit of $100mil to 10x their money.
I haven’t looked at the data personally but my hypothesis is inexperienced founders and $30mil exits are more likely than over $100 mil exits with experienced founders. It’s far more likely to sell for $30mil than it is to have an exit upwards of $100mil. So while a n experienced entrepreneur will be more likely to have an exit at $30 mil than an inexperienced one, it won’t produce the same returns for the investors