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- The Truth About The Pig Slaughter Model Used By VC Investors
The Truth About The Pig Slaughter Model Used By VC Investors
VCs look at your company like the farmer's pig.
Startups are designed to follow the normal distribution or bell curve in their lifecycle. After a specific amount of time, it is no longer viable to continue growing the company.
In most mathematical modeling textbooks, a problem poses the question of how long one can feed a pig before growth slows beyond the input. VCs look at your company like the farmer's pig.
At some point, growth slows to a point where further investment is no longer viable.
Planned obsolescence
Everything from phones to toothbrushes has been engineered to last a specific amount of time before becoming inoperable. However, what most founders do not know is that their VC-backed startup is also designed to only last so long before no longer being viable.
Culling
When the farmer takes a pig to market, they have new ones ready to restart the cycle. The same is true for the VC. Your company is a pig that the VC wants to get to the top of the bell curve before selling. Like the farmer with a sick pig, they get rid of it quickly if that does not happen.
Competition
A farmer puts feed out each day for all of the pigs. The most aggressive pigs get more food than the timid ones. This means they grow faster than the others. It also means they are taken to market first. Sound familiar?
Genetics
Some breeds of pigs grow faster than others, with all else equal. The pigs raised today are different from those of just fifty years ago. So, too, are the companies that VCs invest in. What farmers and VCs want are investments that grow the fastest given an equal amount of input.
Market demand
Pork and whatever the startup market produces sometimes loses favor. During these times, the farmer and VC will likely clear their portfolios of doomed investments. After all, there are investments for every market.
Conclusion
When you consider your company as livestock, you get a simplified model of what investors want and how to best position yourself to maximize growth.