1 in 200,000 - The Investor's Blind Spot
Why 90% failure isn’t a portfolio problem, but it’s a pattern of avoidable loss.
Breaking the 90% Pattern
For context, roughly 15 Danish companies and 68 in the UK shut down every day.
In this issue, I’ll show you how to break that 90% pattern by:
Tracking Decision Velocity as a KPI.
Measuring Trust Erosion quarterly.
Adding a Recovery Readiness Check to every investment or board review.
The Venture Facts
The venture game runs on asymmetry, where a few outliers carry the weight of the entire fund.
Only 0.05% of startups secure venture capital funding.
1% of those achieve unicorn status (valuation over $1 billion)
But few ask why those ventures fail in the first place.
It sounds rational in a spreadsheet.
But when you zoom out, a deeper pattern emerges: most of these failures aren’t fatal flaws of innovation.
They’re symptoms of a system that celebrates momentum and ignores recovery.
The Data Behind the Pattern
In Q1 2025, global funding hit $91.5 billion.
64% percent of that came from U.S. investors — yet most of the capital flowed upstream toward later-stage companies with traction.
Meanwhile, pre-seed and seed founders faced an invisible drought.
They were not underperforming but under-validated.
At the idea stage, investors still overvalue intellectual property by more than 250%.
They assume scalability will follow naturally from novelty.
But 60–70% of pre-seed startups never reach Series A.
Around 35% of Series A companies fail before Series B.
By Series C, almost none collapse — but that’s because the weak ones are already gone.
Where Recovery Breaks Down
Investors often interpret the falling failure rate at later stages as proof that the system works.
In reality, it shows that the market has already eliminated the weaker companies. The data track survivors, not successes.
Capital tends to flow toward startups that feel safer, familiar sectors, repeat founders, or traction-rich cases, rather than those that may have stronger fundamentals or ideas but appear riskier.
This migration toward “safer bets” has a cost: it eliminates the possibility of disciplined recovery at the earliest stage, where intervention still matters.
In chasing unicorns, investors have trained themselves to accept 90% loss as inevitable instead of seeing it as a design flaw in their own behavior.
The Recovery Odds Index™ View
In the Recovery Odds Index™ model, this is where the first cracks appear:
Investors and founders both mistake optimism for readiness.
They fund growth before testing survival.
They talk scale when they should talk stability.
The model starts from a different premise: that resilience is a system, not a sentiment:
Before asking how fast a company can grow, ask whether it can adapt.
Before examining market size, consider decision speed under pressure.
Before valuing IP, value leadership clarity.
Across 25 years of turnarounds, I’ve seen the same five blind spots repeat in every portfolio collapse:
Treating 90% failure as acceptable noise.
Funding scalability before stability.
Ignoring founder psychology in due diligence.
Under-monitoring early-warning signals post-investment.
Rewarding narrative momentum over adaptive discipline.
Each one erodes what I call the Six Engines of Recovery, especially Leadership, Liquidity, and Alignment.
How to Break the Pattern?
The result is predictable: cash evaporates, confidence fractures, and everyone blames timing, but:
What if due diligence included a Recovery Readiness Check and not just a product or market review?
What if every board treated decision velocity as a KPI, not a soft skill?
What if we measured trust erosion the same way we measure burn rate?
Those questions aren’t idealism. They’re operational risk management.
In a venture, the earlier you identify fragility, the cheaper it is to fix.
The next era of investing might not be defined by who finds the next unicorn, but by who understands recovery psychology.
The investors who master that will quietly outperform everyone still chasing exponential curves.
In the Turnaround Readiness™ framework, recovery starts long before distress. It begins the moment leaders stop treating fragility as failure — and start treating it as feedback.
Failure is not random.
It’s rehearsed through repeated blind spots.
And like any rehearsal, it can be rewritten.