via Binary Pricing « Five Years Too Late.

A very excellent post on how the risks have changed in the online venture game, and how the economics of venture capital have adjusted accordingly.  The entire post is written generally but ends with a justification for RRE’s investment in hot potato, and some insight into the pricing of that deal.

In my view, the best possible deals from a pricing perspective are deals like the one we just did with Justin Shaffer called Hot Potato. We funded Justin at a seed round price because we believed in Justin and thought that traction would occur. But the price reflected the lack of traction (and even a launched product) at that point.