Valuing a rate of return from an effort
If you have looked at the previous two posts , then you would have figured out that it is next to impossible to differentiate a potential successful idea from a failure ( atleast at initial stages ).
So how do VC’s make the call - They dont make a call on the idea, they make a call on the people behind the idea. My personal take is that no idea in this world is a waste ( in absolute value terms ). Its just that the intrinsic value of the idea would decide if the people behind the idea would be willing to put their efforts behind it.
Failed ventures arise when companies ( people behind these ventures ) are unable to correctly estimate the potential returns from a venture and do a comparison of this return with their expectations on a rate of return they expect.
Calculating the expected rate of return is not easy and at times is made up of not so easily measurable attributes like "happiness, pride et al". If you had an option of working for a firm doing perl scripting at monthly salary of 80 K rupees and running your own magazine that got you only 40 K per month. On a simple rate of return , you might immediately discard the Magazine idea, but in terms of valuing the pride associated with running something on your own versus SSH’ing into a unix box to run a few perl scripts for the next few years. Whats your take ..
This blog post has been all over the place .. so dont know if you have got the gist of what i have tried to say .. may be i should take blogging lessons 
Parting question - Do you LIVE your life or Do your RATIONALIZE your life ?
