The single question which entrepreneurs should ask their prospective VC investors

What’s your capital loss ratio?

That will tell everything you need to know.

The point I’m making is all about how often a VC investor writes off their investments; which is what matters most for the entrepreneur, as for them it’s a binary event — either they’ll make it or not.

Your VC of course will have a completely different opinion. They will talk about finding the next global champion, about aiming for world domination, etc. The funny ones will say that they are looking for the next Facebook or something like that.

Hear them not. They don’t know. They are confused.

Just look around you:

• Customer development
• Lean startup
• Agile

Numerous techniques, tools and methodologies aiming to a single objective: Reducing waste.

It’s then becoming almost ridiculous that the average Venture Capital investor, most likely including your own prospective VC, considers a capital loss ratio of~80% as “natural” and “reasonable”, pushing their portfolio companies to notoriously overspend ("aggressive deployment of capital", they call it), which in a few words is all about maximizing waste.

Ignorance, confusion or anything else, it's a true tragedy for sure.

Don’t fall into the trap of generating waste. Don’t listen to the vanity metrics sirens. Just make sure that you take the right action on the right time (and you may want to read about a team who has successfully made it). Success then, both for the founders and the investors, is inevitable.

Make a wise choice for your co-driver. Choose someone who respects their investors’ money as much as you would like them to respect your company.

Choose an investor with low capital loss ratio.