Venture capital (VC) investments are very risky. Studies by the Ewing Marion Kauffman Foundation and the U.S. Bureau of Labor Statistics show that approximately 60 percent of venture capital–funded start-ups survive to age three and only about 35 percent survive to age 10. (The studies focused on only incorporated companies with employees.) Almost anything can go wrong—from a poor management team, to issues with technology, and market saturation.
Venture capitalists have focused on risk ever since the first publicly owned VC firm (American Research and Development Corporation) was founded in 1946. As technology has become more complex and a wider array of risk factors have emerged in recent years, venture capitalists have created stand-alone risk management departments or, at the minimum, created the position of chief risk officer to address these challenges.