A good and true point. How invalid do you think this counterargument is?

If anyone could identify early-stage companies with a 75-100% chance of being profitable, wouldn't we see an investor niche that supports this?

(I can think of one counter-counter argument: the hype created by VCs is so big that the investor and founder markets are acting irrationally.)

Would love to hear anyone else's thoughts on this.

"If anyone could identify early-stage companies with a 75-100% chance of being profitable, wouldn't we see an investor niche that supports this?"

We can't do that for the current style of VC investing. Why would we need to do it for a more modest form?

The other bonus is that profitable startups usually need less VC money. So given the same amount of funds, VCs could spread their investments out over even more companies.

I'm a little confused, but I think you restated my point. The portfolio approach appears to be the optimal strategy in an open game like startup creation, where the upside is potentially infinite and the uncertainty is really high.

I guess I was asking if there are other explanations for why this is, or if the strategy appears to be optimal to others.

If it is the best strategy, any discussion about unicorns versus profitably invested smaller startups is moot, because it's based on the assumption that the investment class should do something that's strategically suboptimal.