
"There is a non-linear reduction in risk that takes place with adoption of a service." - pius
http://continuations.wenger.us/post/31828952
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dnaquin
_What Paul ignores is that there is a non-linear reduction in risk that takes
place with adoption of a service._

This was my exact response to pg's article. Or at least that one sentence that
seemed to stick out.

 _If you're investing at a tenth the valuation, you only have to be a tenth as
sure._

But of course pg cleared that up. The key is not that you can be 1/10th as
sure that said investment will be successful, but that you can be 1/10th as
sure that said investment will be worth $1B. Fixing final valuation linearizes
things.

 _Suppose your threshold for investing in a startup is an n% confidence that
they'll one day have a market cap of a billion dollars.

Suppose instead you split that investment between 10 companies at a tenth the
valuation. How confident do you have to be that any given one will become a
billion dollar company?_

