Something for Nothing...

Surely the best deal is the one that generates the greatest return on investment. But those apparently in the know keep telling me Proof-of-Concept funds can't make money. But aren't business angels tying to make money and they are managing their own mini -POC fund. If you can make money on a small scale why, I ask, doesn't this scale up?

If you watch Dragon's Den they are always looking for the largest percentage of equity they can get. But 100% of nothing is still nothing, so you could say that it doesn’t matter whether you get 20% or 40% (this has been the argument of a few VCs who seem to cut much more generous offers than the dragons do) given most will fail.

Surely the point is that for the 1 in 10 early stage deals that really do fly, what percentage you have of that one is very much the differentiator when you come to analysing the overall portfolio returns. Is the problem then that larger funds just aren't prepared to get down and dirty with regards to valuations whereas individual business angels are very much focused on getting more for less? The fact that an early stage business will often get the cheapest money it's going to get i.e. grant funding followed immediately by the most expensive in terms of equity investment does little to help the situation!