Why do VCs prefer 'safe bets'?

A couple of weeks ago I read this excellent post by Hector Mason about how VCs like to make safe bets. Since then I've been thinking about why. Here's some reasons that I've come up with:

1. Risk

There are only two things that matter in traditional investing; risk and return. Most humans are risk averse and so we have 'safe bets'. In failure, the investor can point to the credentials of the founder and say "well here's some 3rd party validation that the founder was capable, anyone would have reached the same conclusion as me";

2. Scale

Most VC firms and accelerator programmes are not designed to optimise for founders or for finding outliers, they are designed to scale the VC firm. VCs receive 100s or 1000s of inbound pitches per year. They probably don't have time to properly assess passion, work ethic etc but Oxbridge education and blue chip experience can be ticked off by a machine (or by a junior member of the team). In that sense its a shorthand to allow the VC or the accelerator programme to scale;

3. People are mimetic

Most people don't know what they want so they want what other people want (and that's often Oxbridge, blue chip etc). If something is coveted then human nature determines that it's attractive.

At State School Ventures we intend to help risky bets become safe bets and to redefine how VCs perceive "safe bets" so that we have less overlooked outliers.