Does Size Matter (In VC)?

In the ever evolving and complex world of venture capital (VC), one question that often stirs up heated debate among investors, entrepreneurs, and market observers alike is: “Does size really matter?” More specifically, do the initial valuations and check sizes that venture capitalists choose to bet on significantly determine the final outcome of their investments?

The genesis of this discourse lies in Hunter Walk’s thought-provoking piece, “Paying Too Much Too Often.” In his article, Walk firmly emphasizes the critical role that valuations play in venture capital, asserting that the size of the initial check, valuation, and ownership targets are factors of paramount importance. He suggests that these initial markers can make a significant difference in the financial return from an investment.

In response to Walk’s arguments, this article seeks to explore the nuances of the relationship between size, i.e., valuation, and outcomes in VC. While we acknowledge that initial valuations have their role, the idea that size or valuation is the primary determinant of success in VC is something we aim to probe deeper into. By bringing in concepts such as the power law, seed stage ownership, and the advantages of making more bets, we plan to present a comprehensive examination of the role size plays in VC and its potential impacts on investment returns.