An ability to raise money does not necessarily signify an ability to make money. But investors forever confuse the two skills, and this leads to a damaging misallocation of capital.

Early-stage ventures are in essence a gamble on the entrepreneurs involved. The projections of expected revenues and profits always point upwards: but no one knows the future and almost every business plan I’ve ever seen ended up wrong. Usually, launches cost more and take longer than budgeted, and often the entire model proves to be flawed – but sometimes another opportunity presents itself and becomes the enterprise’s salvation. In this, the ultimate game, the difference between the winners and losers depends entirely on the men and women you back.

I have known a number of talented promoters who are brilliant at obtaining finance for new schemes. They move, apparently seamlessly, from one project to the next: a decade ago it was the internet, then China, then mining, then infrastructure – and so on. In their minds, possessing genuine technical expertise is not seen as a requirement. They have a great instinct for the zeitgeist – the asset class of the moment. They learn a script and recruit a gang of “experts”, and prepare a very persuasive business plan. They know all the buzz words – scalable, traction, leverage, burn rate, vesting and so on. They understand the intricacies of structuring transactions to benefit themselves. But none of this means they can execute their great vision in the real world.