Comments on: You Can't Pick Winners at the Seed Stage

By: Prediction Markets for Valuing Private Companies | Midas Oracle .ORG

Prediction Markets for Valuing Private Companies | Midas Oracle .ORG — Wed, 03 Jun 2009 20:24:47 +0000

[...] its prospects become. Kevin Dick believes small groups like angel investors and venture capitalists can’t pick winners at the seed stage. But what about large groups and the “wisdom of crowds”? Perhaps aggregating [...]

By: Prediction Markets for Valuing Private Companies « The Emergent Fool

Prediction Markets for Valuing Private Companies « The Emergent Fool — Wed, 03 Jun 2009 19:49:05 +0000

By: On the Advice of Counsel… « The Emergent Fool

On the Advice of Counsel… « The Emergent Fool — Sat, 09 May 2009 03:08:54 +0000

[...] You Can’t Pick Winners at the Seed Stage [...]

By: kevindick

kevindick — Tue, 28 Apr 2009 02:36:32 +0000

Hey Naren, thanks for stopping by. You are of course correct about actively managed mutual funds not consistently beating the broader market.

However, most people believe the explanation is the efficient markets hypothesis: that all the available, relevant information is already incorporated into the price.

This looks less likely to most people for seed stage startups. I actually do have an argument along those lines, but it requires assuming that there is efficient substitution between employee and founder job opportunities. Fewer people seem convinced of this assumption so I typically go with the argument based on uncertainty.

By: Naren

Naren — Mon, 27 Apr 2009 22:29:36 +0000

Agree! Burton Malkiel reaches similar conclusion on actively-manged funds in his classic “A Random Walk Down Wall Street”.

However, I suppose if one is “Warren Buffet” of angel investing, then he/she might be able to beat your model. Then again, have you come across such an individual in your research..