Most Venture Investors Target 10x-20x, Not Unicorns

If you read startup blogs and listen to the popular podcasts, you might think the only way to raise money today is with an idea that can become worth tens of billions. Those companies get the hype. They represent the biggest ideas and the biggest funding rounds.

The reality is different. A recent blog post laid it out plainly: most venture firms would be thrilled with a 10x to 20x return on any given investment. The post estimated that 80% of venture firms would be happy with that outcome. They are not chasing trillion-dollar outcomes. They are looking for companies that can compound at high rates over a long period and eventually go public or get acquired at a high multiple. A 10x or 20x return makes everyone happy.

The post also touched on a dirty secret that does not get discussed much. Most startups, including venture-backed ones that raise millions, will sell for less than their last valuation. The few that make it and return the fund are necessary to pay for all the losses from the ones that do not. The math works because the mega success stories subsidize the failures.

That is the framework most venture firms operate under. They know most investments will not return even 1x or 2x. So a 10x or 20x outcome is a win.

For entrepreneurs, the advice is straightforward. Do not get caught up in the hype around AI companies with unfathomable growth rates. Focus on delivering real value to real customers in a way that is sustainable over time. Most venture investors are not looking for a trillion-dollar company. They are looking for a company that can deliver an incredible return within five to ten years.

The AI growth rates and valuations are inspiring. They are not the standard for the vast majority of venture investors. Build a great business.

That is the core message from the blog post. It is a useful reminder for anyone raising money or building a startup. The hype is loud. The math is quieter. The math pays the bills.