> Even if someone sends you raw data you are taking their word that it’s the true data.
With hundreds of millions on the line, is it so much to ask that VC firms employ a couple statisticians to at least do a sanity check on the data? Fake data can often be identified as fake.
VCs differ wildly. A small VC will certainly not earn enough in fees to employ multiple dedicated statisticians. They will likely have a CFO/other analysts who can check the data but there's no guarantee they will catch cleverly manipulated data. Obviously this is a much later stage investment so different diligence is expected but there are many ways to deceive. Certainly some VCs saw red flags while others did not.
Hmm. This is kinda the opposite of what I'd expect.
I'd think a smaller VC would be more conservative with their risk, while a large one would be more liberal, in that the larger VC could withstand more failures to get the even bigger infrequent wins
That’s an interesting thought, I’m not really sure how different the risk tolerance is. If you’re allocating 5% of your fund into a deal I imagine you’d be similarly conservative at both levels as the dollar amount is different but the risk is still the same portion of your fund. If anything the smaller may be more liberal as the multiples are higher in early stage. Both are expected to have failures but a larger VC has more resources at their disposal; A small VC can’t do the same diligence that a large VC with an army of financial analysts can do.
With hundreds of millions on the line, is it so much to ask that VC firms employ a couple statisticians to at least do a sanity check on the data? Fake data can often be identified as fake.