The appeal of venture capital (VC) is undeniable. Headlines about unicorns, disruptive technologies, and extraordinary returns have created a perception that venture investing is a golden ticket to wealth. Yet, beneath the glamour lies a reality that is far more complex, risky, and nuanced. VC is not for everyone and for a good reason.

The riskiest corner of investing

VC sits at the far end of the risk spectrum. Investors are not buying into proven cashflowing businesses instead they are backing ideas, teams, and markets that may or may not materialise. A significant majority of venture backed startups fail to achieve scale and only a very small fraction ever become unicorns. For every success story like a fintech unicorn or a biotech breakthrough, there are dozens of companies that never progress beyond Series A.

VC investing is not about avoiding losses, it is about accepting that many losses are inevitable in pursuit of a few outsized wins.

Expertise is essential

Unlike listed equities or even private equity,VC demands deep technical knowledge and sector specific expertise. Evaluating an early-stage company requires understanding not just financial models but also market timing, intellectual property, scalability and the quality of the founding team.

This is why professional VC firms employ partners with backgrounds in engineering, life sciences, or data science, alongside seasoned investors. As leading firms often emphasise, product market fit and execution capability are just as critical as capital. For the average high net worth investor, this creates a steep barrier to entry, one that cannot be overcome by enthusiasm alone.

The long-term hold

One of the defining features of VC is its long-term horizon. Unlike hedge funds or listed securities, VC investments are typically locked in for six to ten years, with limited secondary exit opportunities. This reflects the time required to build companies capable of reaching scale or achieving an exit.

For patient investors, this illiquidity is not a weakness but a feature. It shields capital from short-term volatility and rewards conviction. As such, VC is best positioned as a strategic slice of a diversified portfolio, suited to those willing to commit for the long haul and engage with the innovation economy.

The changing market environment then and now

To understand why VC looks different today than it did even a few years ago, it helps to see how the environment has shifted.

2010s - The Boom: After the Global Financial Crisis, ultra-low interest rates and abundant capital in public and private markets fuelled very aggressive VC investments. Investors were willing to assume high risks, valuations climbed, and exits via IPOs felt reachable.

2020-2022 - The Frenzy: The COVID-19 pandemic accelerated digital transformation in many sectors (e.g., health tech, e-commerce, remote work). Valuations soared even when revenue or margins were weak. Investor optimism was high and many companies raised large rounds without necessarily having fully proven business models.

2023-2025 - The Reset: Rising interest rates, inflation, and macroeconomic uncertainty have cooled the market. Many companies now face down-rounds (raising funds at lower valuations than previous ones), valuation write-downs are becoming more common, and investors have become more disciplined. The capital that once flowed freely is now more selective. In this recalibrated environment, only those funds with strong due diligence, sector expertise, healthy cash reserves, and patient LPs tend to survive or outperform. Beyond Returns:

Why Some Still Choose VC

Despite its risks and complexities, VC remains attractive for certain investors. It offers exposure to innovation, diversification beyond traditional asset classes and the potential for extraordinary returns. For family offices, institutional investors, or entrepreneurs with sector knowledge, VC can be both intellectually rewarding and financially lucrative. But the key is alignment. The investor’s risk tolerance, liquidity needs and time horizon must match the nature of the asset class.

Conclusion: A selective opportunity

Venture capital is not for everyone, nor should it be. It requires a strong stomach, deep expertise, and patience. The investors who succeed are those who approach VC as a carefully considered component of a broader strategy, not as a shortcut to riches.

In an age where headlines amplify the extraordinary few, we must remember the silent majority of ventures that never make it. For those prepared to accept the risks, the journey can be rewarding. For others, it may be wiser to admire from the sidelines.