What is Power Law?
The pattern in venture returns where a few investments produce most of the gains and most return little or nothing. It is why investors back many companies and ask whether each one could grow very large.
10 pots · 7 stall · 1 makes 80% of growth
The power law in venture means…
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In real work
Looking back at her 30 angel investments, Mei saw the power law at work: two companies made up nearly all the gains and 19 returned nothing.
In the illustration
Ten pots get the same seed and the same drip of water. Seven stall at the soil, two reach the 2 mark on the height rail, and one climbs to 16: on its own, 16 of the 20 units grown.
Test the power law in your deal notebook on the 20 investments I list below: rank them by gain, show what share of total gains the top two produced, and note which values are still on paper.
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03Career
Find the work that uses it
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