Facebook Inc (NASDAQ:FB) is a unicorn, or at least was one, since the tech company has added billions to its valuation since its inception. Venture capitalists hunt for such unicorns. However, the question is whether these unicorns are the only hunt worthy of attention in the venture capitalist’s world?
On Fox Business Alan Patricof, Managing Director of Greycroft Partners, disagreed with Marc Andreesen, co-founder of Andreesen Horowitz, as far as hunting for the like of Facebook Inc (NASDAQ:FB) is concerned. Both venture capitalists have a different strategy when it comes to hunting unicorns.
“[…] About every 12 months there are 15 companies created that will get at some point to a 100 million dollars of revenue, those are the ones that go public, those are the ones that get to billion dollar valuations, those generate more than 90% of venture capital returns,” said Andreesen.
While Andreesen had little regard for the ventures outside the sphere of these 15 companies, of which Facebook Inc (NASDAQ:FB) was once a part, Patricof showed more reverence for them. He was of the opinion that investment in other companies who are in no way unicorns, as they will probably never reach billion dollar valuations, can still be profitable.
“[…] The truth is you can make money in venture capital without hitting Facebook Inc (NASDAQ:FB), and that was the whole strategy behind Greycroft, you don’t have to have Facebook, or Google, or Snapchat […],” said Patricof.
It is not easy to identify which companies will render themselves an essential part of our everyday lives in the future, especially when they are just at a groundbreaking stage. It is easier for us to say now that Facebook Inc (NASDAQ:FB) was an easy choice, but it wasn’t. There were other social media platforms before Facebook which didn’t survive. Moreover, Facebook even had a hard time after its IPO to convince investors of their business model.
Hence, venture capitalists should have a truly gifted gut feeling to identify such companies, but even if they don’t, that shouldn’t be a barrier for investors, according to Patricof. They should just be ready to reap less returns and hope to hit the lottery soon.
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