Let's get this obvious statement out of the way! Investing in the seed/early-stages of a company’s life cycle is very risky (of the 600,000 companies incorporated annually 12-24 companies will launch an IPO while venture capitalists invest in only .25% of companies reviewed). Some liken it to gambling in Vegas. So why are so many investors attracted to this investment class in light of the risks? The answer is early-stage investing is a “hits” business. When companies succeed they oftentimes return many times the initial investment (>10x) overcompensating for the losses, and private equity generates 25% annualized returns if structured correctly (Source: Wiltbank Study – Willamette University).
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