A Guide to Early-Stage Investing
Investing in a private company is very different from buying a public stock. The points below explain the essentials.
- 1
Most individual startup investments lose money.
The distribution of venture outcomes is extreme. Correlation Ventures' analysis of tens of thousands of US financings found that, measured by number of deals, roughly two-thirds lose money, and fewer than 4% of invested dollars return 10x or more. A separate 2025 analysis of 31,000+ global venture deals reached a similar conclusion: about 62% lost money, and more than half lost most of the capital invested. Venture returns follow a “power law” – a few big winners drive nearly all the gains – so any single position, including any one we show you, carries a real risk of partial or total loss.
- 2
So you must diversify.
Because a few winners drive nearly all the gains and most positions lose money, the worst thing an early-stage investor can do is put everything into one or two deals. The math only works if you spread across many companies – expecting most to fail – so that the rare big winner can carry the whole portfolio. Treat every single investment as money you could lose entirely.
- 3
How much to invest.
A common guideline is to cap early-stage venture at a small single-digit percentage of your net worth, built up gradually across many deals rather than a few large bets, and only with money you won't need for 10+ years. If losing the entire amount would change your life, the amount is too big.
- 4
Your money is locked up.
Most startups never reach an exit – so any exit timeline applies only if the company succeeds. If it works, the hold to a successful exit has historically run several years to a decade, depending on the stage you invest at (see the table below). Many positions never get there, and can stay illiquid indefinitely or be written off. Selling early on the secondary market is sometimes possible but is not guaranteed, and can be hard to access for a small holder on the cap table, which RBV typically is. Don't invest money you may need.
Typical hold to exit, by stage Stage Typical hold to exit Pre-seed 8–12 years Seed 7–10 years Series A 5–8 years Series B 4–7 years Series C 3–6 years Later 2–5 years Only if the company succeeds. These ranges apply only to companies that reach a successful exit (historically ~10% of venture-backed startups); they are estimated from median founding-to-exit data (~9–11 years, and lengthening) less typical time already elapsed to reach the stage, and exclude failures and ‘zombie’ companies that never exit – so a real portfolio's experience is longer and more uncertain than the range implies.
- 5
Returns come late – the “J-curve.”
Early-stage investments often look worse before they look better. In the first few years, marks may be flat or down, companies raise more money, and there's no liquidity – this is normal, not a warning sign. Value in venture clusters at the very end of a company's life. Patience isn't optional; it's the strategy.
- 6
A “markup” is not cash.
If the company raises later at a higher price, your stake's paper value rises – but you receive nothing until a real exit, which may be years away, and the final result can differ greatly from any interim mark.
- 7
It's important to have both a thesis and consistent investment criteria.
A good investor needs two things: a thesis (where to look) and criteria (what to look for once you're there). Ours are specific.
Our thesis – where we focus. RBV backs private companies founded or led by Cornell students, faculty, staff, and alumni. We focus on Cornell because it's one of the most innovative and entrepreneurial universities in the world, with reach across every industry, geography, and company stage – and at 300,000+ members, a community large enough to source strong companies and to support them with capital and expertise. This gives us a defined, high-quality place to source deals rather than chasing them at random.
Our criteria – what we look for. These are bets on a specific thesis, not lottery tickets. Successful deals tend to share three signals: (1) a team that can execute; (2) commercial traction and/or defensible technology; and (3) respected co-investors and domain experts who lean in. That third signal is central to how we work: capital follows the conviction of domain-specific experts – operators, founders, and industry leaders whose judgment is grounded in relevant experience, and whose engagement can change the trajectory of a company. A large market matters throughout – even a great team struggles in a small one. We organize our process around finding and verifying these signals before we put capital to work.
For a deeper walkthrough of how a deal moves from intro to close, see how it works.
- 8
Later investors can rank ahead of you.
Future rounds often carry rights that get those investors paid back first, and terms that can further cut what earlier investors receive. This is normal in venture financing, but it directly affects your outcome. The example below shows the same company sold for $60M, where you hold a 2% stake and $20M of investment came in after you:
$60M exit – your 2% stake If senior investors convert to common If senior investors take their preference Paid to senior investors first $0 (they share pro-rata) $20M (off the top) Value left to share $60M $40M Your 2% stake receives $1.2M $0.8M - 9
Dilution over time & pro-rata.
Every time a company raises another round, your ownership percentage shrinks – this is normal and happens to all early investors. One way to protect your position is “pro-rata”: the right to invest more in later rounds to maintain your percentage. Small holders often can't secure these rights on their own, so RBV actively seeks pro-rata rights on the deals we lead, at least through Series B, on the network's behalf.
Pro-rata rights are only useful if you have capital ready to use them. Professional venture funds typically reserve 40–60% of their capital for follow-ons. For an individual angel, the more common rule of thumb is a roughly 1:1 ratio – set aside another 50–100% of what you put into initial checks, so if you invest $50,000 across new deals, keep another $25,000–$50,000 in reserve to follow on in your winners. This lets you maintain your stake in your highest-conviction positions rather than being diluted out of exactly the deals you'd most want to double down on. How much to reserve is a personal decision – but assume your stake will be meaningfully diluted by the time of an exit unless you follow on.
- 10
What can go right.
None of this means early-stage investing is a bad bet – it means the payoff is concentrated. The same power law that makes most deals disappoint means a single company returning 20x, 50x, or more can outweigh many losses and drive a strong overall result. That's the entire logic of the asset class: many small, capped losses in exchange for a few uncapped winners. It's why diversification and patience matter so much.
- 11
A note on taxes (QSBS).
In the US, gains on certain early-stage stock held long enough may qualify for meaningful tax advantages (known as QSBS, under IRC §1202). Rules are specific and change, and not every position qualifies. This is not tax advice – consult your own advisor about your situation.
- 12
Why fee structure matters – same deal, different vehicle.
The comparison below holds the company and its outcome constant. It isolates one thing – how much of your committed capital actually buys shares – and is not a claim that RBV picks better investments.
Per $10,000 committed RBV SPV Traditional VC fund Management fee One-time 5% ~2%/yr (~20% over 10 yrs) Carry 20% 20% Capital that reaches companies ~$9,500 (95%) ~$8,000 (80%) If the shares do 3x, net to you ~2.5x (~$25,000) ~2.1x (~$21,000) Illustrative, same deal and same 3x gross outcome, net of 20% carry. Because more of your capital is invested, the identical company outcome produces a materially higher return – roughly 15–18% more, purely from fee structure. Carry is identical (20%) in both; the difference comes from more of your money reaching the company, plus RBV's one-time fee versus a fund's fees compounding annually for a decade.
An important caveat – diversification. This comparison comes with a real asymmetry: a traditional fund spreads your single commitment across 20–50 companies automatically, and because of the power law (§1), that diversification raises the odds of catching a winner. A single RBV SPV is one company – so one SPV on its own is riskier than one fund.
The resolution is to build your own portfolio. As §2 explains, the way to invest through RBV is across many deals, not one. When you build a portfolio of SPVs, you get the diversification a fund would give you – plus the fee efficiency shown above, plus the ability to choose each deal yourself rather than accepting a blind pool. That combination, not any single SPV, is the RBV case.
These are general points about private-company investing, not predictions about any specific company. Nothing here is investment, legal, or tax advice.