Summary : Slide 26

By now, the reader should be curious, at a minimum, about the approach. The approach is believed, success is assured. The venture capitalist always wins.

As a side note; of course this narrative tale is given a spirit of narration. When we say always, we mean, the likelihood of a venture capitalist failing in its investment is vanishingly small. Technical people will insist that this narrative be footnoted appropriately to indicate that occasionally rules and flat statements are false, as are all final things. It should be remembered, however, that what we are presenting here is a demographic percentage of accuracy, much like the tossing of coins that can vary between a thirty percent accuracy to a one percent accuracy (depending on the number of coins), does not mean that it is impossible to have a thousand coins all having the same side show. What is does mean however, is that the likelihood of such a thing occurring becomes a vanishingly small probability. The more events there are, the more these events are independent considerations.

We argue that between 30% to 50% failure rate on R&D projects will yield an optimum R&D valuation across all projects. Corporations are guaranteed to lose on toady's road--today's road being minimizing the risk on individual projects, grouping them together making the projects large.

The drive, particularly for legacy projects, to reduce risk at all cost and to never have a failure, insures that the value of each of the projects, both an individual and a portfolio basis, also approaches zero. The modern R&D manager must think portfolio and insure a failure rate, rather than a success rate, to increase the valuation across the group.

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