Suppose you're the manager of a venture capital fund. You've identified 11 hot companies, each of which has a decent chance of striking it rich, providing your fund with returns 10 times as great as your original investment in the company. Your investors, however, want a safe road to riches. Can you use your mathematical knowledge to increase the probability of financial success?

Here's a warm-up problem. Let's say that your fund has $17 million to invest. Each of the 11 companies has a 40 percent chance of yielding 10-fold returns and a 60 percent chance of going bust. Your investors want at least a 60 percent probability that the fund will grow to a minimum of $60 million. How should you allocate the $17 million among the companies?

This article was originally published with the title Venture Bets.

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