Want to know which startups are particularly risky for investors to put their money into? Calculations by institutional investors suggest that investing in coffee startup Blue Bottle or physician social network Doximity is highly risky. Less risky: Palantir and Airbnb.
These estimates of risk are based on an arcane financial term called weighted average cost of capital. That’s an estimate of how big an annual return on investment investors need in a company to make up the risk they’re taking by putting money into the company. If the return isn’t possible, the investors should put their money elsewhere.