Mason  🏃‍♂️ ✂️

Not to say that VC works perfectly... but if it systematically fails to identify certain kinds of value, that’s a massive exploitable opportunity conferring rewards proportionate to the egregiousness of the systemic error

In other words, “the idea seemed crazy so they ALMOST couldn’t find funding” is exactly what you should expect to see if the system *is working*

If you believe both (a) good entrepreneurial ideas matter & (b) VC is systemically biased in some direction that makes it a poor evaluator of ideas, you should predict that a fresh team is about to come in & wipe the floor with the good ol’ boys

A lot of the top-returning startups require several large rounds of funding in order to succeed and get to the point where they can make the enormous returns that VC relies on to cover all their other losses. These rounds are so large that a single contrarian fund is not (1/)

going to be able to go in and fund it single-handedly. So firms have to rely on the follow-ons and the idea that eventually other people will fund as well. There's also far less risk of being massively outcompeted if you know that you and your competitors own all the same (2/)

startups. I agree with you in general, just trying to point out some of the top-level strategy that makes it surprisingly difficult to be truly contrarian unless you already have hundreds of millions or some other major advantage.

I'm a bit skeptical of this frame: AFAICT, supersized funding rounds appear to be "required" by top-returning startups because top-returning startups are the ones willing to force extremely accelerated growth on themselves. They wouldn't necessarily have failed on less funding.

Of course, VC will miss some great stuff, and it's probably more likely to miss stuff that's super expensive to prototype and/or take to market at all. But those bets *do* represent a higher risk, and especially for the littler firms, that might be getting priced in accurately