Free calculator · Fund Economics
Power Law, Odds of Catching an Outlier
Calculates the probability a venture portfolio catches at least one outlier winner, one minus the miss rate compounded across every investment. Inputs are the number of investments and the outlier rate per deal.
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Power Law, Odds of Catching an Outlier
Chance of ≥ 1 outlier
84%
across 30 investments
Expected outliers
1.8
investments × rate
At just 5 deals
27%
a real chance of missing
In a power-law asset class you diversify to raise the odds of catching an outlier, not to smooth toward a mean. More shots lift the probability of a tail winner, but each position is smaller and its ownership at exit is more diluted, the spray-and-pray versus conviction tradeoff.
Learn the concept
This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.