loss ratio

Definition

The percentage of a VC fund's investments that return zero, typically 50-70% despite everyone's confident pitches. The number partners don't mention at LP meetings unless forced.

Example Usage

Our loss ratio is running at 65%, which is totally normal and definitely not a sign we have no idea what we're doing.

Origin

Adapted from insurance and lending terminology to venture capital

Fun Fact

The dirty secret of VC is that most firms have loss ratios above 50%, meaning venture capital is essentially a hits business dressed up as analytical investing.

Source: Venture capital portfolio performance metrics

Related Terms

Beginner

Scale

The startup obsession with growing bigger, faster, and more unsustainably, as if a company were a goldfish and the market were an ocean. Everyone wants to scale, few know how, and most just end up spending more money to lose money at an impressive rate.

🚀 Startup / VC

Intermediate

rolling fund

A venture fund structure where capital commitments are made quarterly rather than in one large closing, allowing GPs to start investing immediately. The subscription model comes to venture capital.

🚀 Startup / VC

Intermediate

exit

In startup land, the glorious moment when founders and investors finally cash out, either through acquisition or IPO, turning years of ramen dinners and sleepless nights into actual money. It's the entrepreneurial equivalent of winning the lottery, except you had to build the lottery first. Every VC's favorite word and every founder's obsession after their Series A.

🚀 Startup / VC

Advanced

negative churn

When expansion revenue from existing customers exceeds lost revenue from cancellations, the holy grail of SaaS metrics. It's losing customers but somehow making more money anyway.

🚀 Startup / VC

Intermediate

follow-on investment

Additional money invested in a portfolio company after the initial round—either because things are going great and you want more ownership, or things are terrible and you're protecting your original investment. Hope and desperation look surprisingly similar.

🚀 Startup / VC

Intermediate

biotechnology

The industry dedicated to using living organisms and biological systems to create products, solve problems, and generally play god in the most profitable way possible. It's where biology meets engineering meets venture capital, resulting in everything from life-saving drugs to designer yeast that makes better beer. Think of it as science's entrepreneurial phase, where petri dishes can lead to IPOs.

🚀 Startup / VC

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