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Comment by nerdponx | Hacker News Reader

I was wondering about this too. Why does this product only work if you're huge? It sounds like something you and a programmer buddy could have started as a side project and grown organically.

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The company I use to distribute my music is like that (DistroKid). Three employees and they turned the music distribution game on its head. I think the founder is active here on HN.

VC's are only interested in high growth startups. That means they'll have to pass up on a lot of good ideas such as OP's. The whole thing boils down to power law that guides investment. VCs are hoping that out of 10, at least 1 would be a super-duper hit (think facebook, google) that'll offset the losses of the other 9.

In short - go with "disrupting" world-changing ideas to the VCs. If your idea is good, but not great, you're better off finding money on your own and growing it organically.

Wouldn't an investor want a "diverse portfolio" divided between low yield low risk (such as OP pre-unicorning) and high yield high risk such as you mention?

I'm not sure there is such a thing as "low risk." Most small businesses fail even if their attempts at "disruption" begin and end with selling pizzas to the local college students.

An angel investor would want a diverse portfolio. A VC wouldn't. VCs make all of their money from the one startup that becomes a billion dollar company and lose or break even or make a little on the rest. So they're really only looking for huge swings with enormous returns.

If you're a seed stage VC you're where a larger fund has allocated a portion of its capital to play insanely high risk/high reward investments.

No, because people who give the money to the investor (limited partners) can optimize their own portfolios. It is not the VC's mandate to do that. From the LP's point of view, investment in the VC fund is the risky component of their portfolio.

For the same reason Berkshire Hathaway isn't investing in your lemonade stand: they have billions to invest, so if you're only making hundreds of thousands on the best day, you're not worth the required effort.

But that's my point. Why go the VC route instead of building a user base organically, eventually getting a small business loan, etc.?

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