A Startup Winner Is a Roulette Bet That Pays 10,000 to 1
One investor puts the odds of a giant winner at roulette odds, but with a far larger payout, so spreading bets beats trying to be precise.
mondaymorning.substack.com · UnapologeticThe case for betting wide in startups comes from an early-stage investor who uses other people's money to back young companies.
His job, as he describes it, is to protect that money and direct it to driven founders who believe in what they are building and want to win. Success rates stay very low, for two reasons. Building a company and choosing which ones to back are both very difficult, and average investors tend to notice and fund average founders.
It is easier, in his account, to fall back on what investors call the Power Law, the pattern in which a few huge winners outweigh the rest combined.
That leads to the casino comparison. Picking a unicorn, a privately held startup valued at $1 billion or more, carries about a 2.6% chance, the same as hitting one number in roulette. A single-number bet on an American roulette wheel, which has 38 pockets, pays 35 to 1. The claimed unicorn payout is about 10,000 to 1 for similar odds. His conclusion: "you might as well play every square."
Questions people ask
Where does the 2.6% number come from?
One divided by 38 is about 2.6%. A European wheel has only 37 pockets, with a single zero instead of a double zero, so the chance is about 2.7%. Casinos pay 35 to 1 on either wheel, which is how they keep an edge.
Do venture investors really fund every startup?
No. Most firms are selective, and even so-called spray-and-pray funds set screens for team, market, and traction. The phrase describes the logic of owning many lottery tickets, not literally funding every company.
Why would average investors favor average founders?
People tend to trust what feels familiar, including backgrounds, ideas, and working styles they recognize. In hiring and investing, that comfort can favor typical candidates over unusual ones who might produce an outlier result.