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Jeremy Diamond's avatar

"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."

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David Wilkens's avatar

I think you are mostly right, but the name of the round is probably muddying the waters a bit. Many seed rounds are becoming more consensus because the average age of companies by the time they raise seed has been increasing over the past decade. Also by the time some of these companies raised a consensus seed they have probably received prior funding or they may be older companies. Some of the smaller seeds may be younger. IIt would be good to understand the underlying characteristics of these rounds based on these dynamics. We are applying the same yardstick when there may be a better way to delineate. One thing is for certain, the VC market has gotten more complex over the years.

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