Why VCs sometimes push companies to burn too fast
I&#x27;m a VC. I think a lot of this boils down to the asymmetric relationship between the upside and the downside.<p>If a company doesn&#x27;t do well, the investor loses all&#x2F;most of their investment. It doesn&#x27;t matter how ambitiously or unambitiously the startup acted, the VC&#x27;s losses are roughly fixed.<p>On the other hand, the difference between a company having a very good (e.g. 8x) vs. fantastic (e.g. 50x) outcome is <i>huge</i>. If increasing burn helps a company grow faster, acquire more market share, and improves the chances that the company will 50x instead of 8x, then that&#x27;s worth a higher chance of failure to the VC because they have some diversification. It may or may not be worth it to the founders, who only work on one startup at a time.<p>So basically, if the two possible scenarios are the following..<p>1) 60% chance to 0x, 30% chance to 3x, 10% chance to 8x<p>2) 80% chance to 0x, 15% chance to 3x, 5% chance to 50x<p>.. then VCs strongly prefer the second scenario. There&#x27;s a slightly higher chance of a loss, but the upside is much, much greater.