Why must you pitch a billion dollar idea!
Written by Raed Masri on Nov. 1st 2018
Silicon Valley investors are not interested in small outcomes, if you can't paint a picture where you startup be worth a billion dollars or billions of dollars, you're unlikely to get funded by VCs. So, how do you pitch your idea in way the shows the massive upside..

You might ask why that is... 

it's really comes back to how a VC makes money. A VC is a professional investor, which means he's investing other people's money, these other people are called limited partners or LPs for short. So here's an example, LPs give a VC $100m to invest in a portfolio of startups, 10 years later, some of the startups are successful, others are not, let's say for example the value created for the VC by the successful start-ups is $1bn, that's a 10x fund. The way profits are distributed is the LP get their money back first, so that leaves $900m which is now divided 80/20 between the LP/VC in favor of the LP, which in this example calculates to $180m to the VC firm.

The math above, can quickly show, that a VC can make substantially less money if a fund generated 2x instead of 10x, the VC's profit on a 2x fund is $20m which need be distributed amongst the entire VC firm.

Raed Masri

Raed Masri helps people tech founders start and grow successful businesses. He is an expert raising capital, scaling customer acquisition, and successfully exiting a business using best in class methods, learned the hard way.
If you're interested in starting your own tech business or raising capital or scaling up customer acquisition or exiting your business then definitely reach out and request a free strategy session today.
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