VCs invest assuming roughly 90% of their deals will be written down to almost nothing. Of the last 10%, some will return some money back but few will break 1-3x. The last few need to be at least 10x to give a useful return to the LPs. Because remember the fund itself took 2% for expenses and has a 20% carry to overcome.
On the other hand, angels don't need a massive ROI to be effective. Since this is a small part of their portfolio (vs being their job), if they can write relatively small checks and get 10x back, the numbers work. Remember, they don't have the expenses or the carry to overcome. In addition, odds are angels are involved when it's still a Qualified Small Business so there's (near-)zero taxes on a significant portion.
This is an overstatement. For most VCs, if failure rates within your portfolio exceed 50%, it gets hard to generate top quartile returns (unless you stumble on the rare unicorn). A more typical distribution for an early stage institutional investor (ie not a seed fund but a fund that leads investments, sits on boards, etc) is 40% of the fund failing. 25% producing >3x return (ideally with at least one or two >10x). and 35% sitting in middle.
VCs invest assuming roughly 90% of their deals will be written down to almost nothing. Of the last 10%, some will return some money back but few will break 1-3x. The last few need to be at least 10x to give a useful return to the LPs. Because remember the fund itself took 2% for expenses and has a 20% carry to overcome.
On the other hand, angels don't need a massive ROI to be effective. Since this is a small part of their portfolio (vs being their job), if they can write relatively small checks and get 10x back, the numbers work. Remember, they don't have the expenses or the carry to overcome. In addition, odds are angels are involved when it's still a Qualified Small Business so there's (near-)zero taxes on a significant portion.