Short excerpt from a Precursor Ventures talk about the venture decision of when to overpay for unusually high-potential startups. The speaker contrasts ‘special’ businesses (examples: Facebook, Stripe, OpenAI) where entry price may matter less because they become much larger than imagined, versus normal businesses where returns scale with entry price.
One is good businesses are rarely cheap, and the good ones always end up being bigger and more valuable than you could ever envision. And I think a lot about people who went into Facebook At 550, people who went into Stripe at a billion, people who went into OpenAI at a billion. It turns out actually there's actually a non trivial amount of overlap between the people who are in those circles. And I think sometimes one of the hardest things to do in ventures to figure out is this a really special business that I should overpay for and not worry about entry price, or is this like a normal business where the amount of money I'm going to make is a function of my entry price?
