Sebastian Mallaby: evaluation

Transcript context

…What then, in your mental model, does limit the size of venture capital? Because as a percentage of entire capital flows, it’s pretty tiny, much smaller than private equity. What, at the margin, makes venture capital not work? You’re right, it’s small. The paradox is that the impact is big. Just a couple of numbers on that: Fewer than 1 percent of companies that get formed every year receive venture capital backing, but if you look at the years since 1995, half of all the companies that go public got venture backing, and three-quarters of the market cap from those companies derived from venture-backed companies. Tiny share get the money — less than 1 percent — but three-quarters of the market cap is the result. That’s the first point. Just because it’s small, it doesn’t mean it has low impact. I think, at the limit, to answer your question directly, there are things which are either so capital-intensive — like building a new semiconductor fab — where you’re really in the billions from the get-go, where that’s . . . Venture doesn’t do that. It’s about starting — Why not? Capital is not that scarce, right?…

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