The New York Yankees won three out of the last four World Series without a home run champion. Instead, they did a lot of the little things it takes to win on a daily basis.
And in the world of venture capital, investment firms have taken a page out of the Yankees' playbook: hitting a lot of singles and doubles, rather than swinging for the fences every time up.
That strategy, VC executives say, has produced a "batting average" of about 95 percent,that is, just 5 percent of the start-ups they fund end up failing.
These VC executives say the trick is to take an active role in a company's construction and remain aware of when the end of the line is near.
"Unfortunately, that's not the point when the decision is made, because there's always $1.6 million left in the bank and it's going to take $1.498 million to clear up all the obligations," says Gordon King, partner at Evolution Capital.
"I think the hardest thing for a VC to say is, 'Look guys, you've got liabilities on your books to your employees. . . . If you want to maintain professional standards in the community, this is the point when you need to make this decision,' " King says.
At VantagePoint Venture Partners, the percentage of start-ups that bite the dust is even lower, says partner David Carlick.
"About 3 percent or 4 percent of our total investment are companies that disappear," Carlick says. "Everybody else makes it some way."
A classic example of a viable start-up is "a company that has executed very well and has great technology, a strong management team, good people, [but] the market isn't interested in this segment right now," Carlick says.
"We know exactly how much cash it's going to take to go to an orderly liquidation," he adds. "We firmly believe that the company has more value to others than that, so we're putting in enough fuel to keep them going for a few months to find a partner."
Janice Roberts, general partner at The Mayfield Fund, agrees that fewer than 5 percent of venture-backed start-ups across the industry simply go belly-up. "The venture industry is much more proactive than people think in terms of working with the companies," she says.
Notes J.T. Treadwell, associate at Bessemer Venture Partners: "You have to give every company your best effort because an important part of the process for entrepreneurs is doing due diligence on you."