Startups & VC’s are notorious for the high beta nature (volatility) of the industry. If you extended the macro view however, and looked at the macro approach towards portfolio allocation, VC funding is viewed as a risk deemed acceptable.

For example, CalPERS (the largest pension fund in the US; for public employees in California) allocates 10% of their funds in Private Equity (and apparently 0.8% into Forestland?). Of the 10%, a portion will be invested into your traditional private equity funds, another to hedge funds, and another to VC’s. In other words, it might be a bet worth taking if investors are properly diversified (famous last words before another crash).

And I wonder how much of VC investments are reinvestments by relatively more successful LP’s (let’s say 1x or more), thereby replenishing that pool of willing capital.