Startup investment is the deployment of capital into early-stage private companies in exchange for equity. It is viewed simultaneously from two perspectives: the founder side is raising the capital to build and scale the company; the investor side is allocating to a high-risk, high-variance asset class with the expectation of outsized returns from a small minority of investments. It is the broader frame that contains both startup funding (the founder-side activity) and the private-investor categories (angels, VCs, family offices, corporate venture) that supply the capital.
The math of startup investment is governed by a power-law distribution that shapes every decision in the asset class. Across a portfolio of venture-bac...