>It is only because they pursue high risk ventures that 9/10 fail and they are only picking high risk ventures because they dream of x1000 returns.But your explanation for their motives is also misleading. A huge constraint on VC's investment strategy is the smaller amount of money they are given. VC's are not giant multi-billion dollar private equity funds like Blackstone/Apollo/Carlyle. (E.g. Blackstone $18 billion fund.[1])
A VC fund may be small like $50 million. Or a more well-known prestige VC can raise $500 million. The recent news of a VC like a16z raising $1.5 billion is a new anomaly.[2] However, the $1.5b is still a fraction of what the private equity guys raise.
With a small $50 million fund, that's not enough money to buy management control of the more stable mid-cap and large-cap companies. Therefore, using a portion of a small $50m fund to write a $500k check to a (riskier) YC company is more meaningful than buying $500k worth of Exxon or Apple stock.
VCs are shooting for 25%+ returns and it's very difficult to do that with large-cap companies. Even Warren Buffett hasn't been able to do it over a given 10-year period.
>They could use a different investment thesis to choose lower risk, lower payoff companies and have a portfolio where only 1/10 fails.
If someone can figure out a consistent way to take $50-$100m and return 25%+ by having only 1/10 failures, that would be an amazing investment thesis. I'm unaware of any industry expert who has that track record.
[1] https://www.google.com/search?q=latest+blackstone+fund
[2] https://www.google.com/search?q=andreessen+horowitz+latest+f...