"The idea that non consensus investing is where the alpha is, is actually quite dangerous in the early stage. Follow on capital tends to be more and more consensus aligned.”
"Common investing wisdom says that to make money, you must be contrarian and right. Venture subverts this. In venture, contrarian/consensus and right/wrong are not orthogonal axes; being right in multi-stage venture is defined by follow-on rounds and markups — in other words, by becoming part of the consensus. Front-running consensus is the winning strategy! Venture is the Keynesian beauty contest in its purest form.
In this framing, a VC’s core competence is knowing when a company is fundable, not just by themselves, but also by downstream investors. Consequently, 80% of the value-add offered by 80% of VCs is helping companies with downstream funding; it’s a goal in itself, not merely a means to an end."
"The idea that non consensus investing is where the alpha is, is actually quite dangerous in the early stage. Follow on capital tends to be more and more consensus aligned.”
This is one of the conclusions from Abraham Thomas's "Making Markets In Time" from earlier this year: https://pivotal.substack.com/p/making-markets-in-time
"Common investing wisdom says that to make money, you must be contrarian and right. Venture subverts this. In venture, contrarian/consensus and right/wrong are not orthogonal axes; being right in multi-stage venture is defined by follow-on rounds and markups — in other words, by becoming part of the consensus. Front-running consensus is the winning strategy! Venture is the Keynesian beauty contest in its purest form.
In this framing, a VC’s core competence is knowing when a company is fundable, not just by themselves, but also by downstream investors. Consequently, 80% of the value-add offered by 80% of VCs is helping companies with downstream funding; it’s a goal in itself, not merely a means to an end."