In 2006, Elon Musk wanted to raise money for Tesla. Kleiner Perkins, an American venture capital firm, priced the electric vehicle company $50 million. Musk later went for another investor which closed a deal at $70 million.
By November 2021, that car company was worth $1.24 trillion. Today, it is worth about $1.01 trillion. Good People, that is a massive economic-transduction, unleashing wealth for families, people and institutions.
When companies come to Tekedia Capital, we truly like to know the opportunity cost of NOT investing because no one can easily forgive himself or herself for missing the Teslas of the future. From Monday, we will share 15 companies Tekedia Capital just invested in during our ongoing Tekedia Capital cycle. They cover companies on quantum computing, modern AI insurance infrastructure in US, paytech in Southeast Asia, fintech in Mexico, B2B ecommerce in Nigeria, wealth management startup in India, and more.
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Power law of Early Stage Investing
The power law in venture capital (VC) is a principle that describes how a small number of investments can generate the majority of returns for a portfolio. This is different from a normal distribution, where returns are spread more evenly.
The power law is a fundamental feature of VC, and is based on decades of historical data. It’s a type of heavy-tailed probability distribution, which means that a small number of occurrences have a disproportionately large impact. In VC, these outliers are often called “home runs”.
Some implications of the power law include:
- A few big winners: A small number of investments can account for the majority of gains in a VC portfolio.
- Enduring many failed investments: The power law helps explain why VCs can endure many failed investments.
- Identifying unicorns: It’s essential for VC funds to identify, assist, and protect their ownership positions in unicorns.
Some strategies for taking advantage of the power law include:
- Looking for opportunities in untapped markets with minimal competition
- Focusing on ventures that could tap into vast markets with the potential to be massive
- Avoiding established incumbents
- Looking for companies that seem out of the ordinary or operate without any apparent past or present competition
- Looking for companies that show robust growth in their early stages
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