Can investors know in advance whether a market bet is premature, or is timing risk only discoverable after the investment is made?

Cyan Banister · Oct 19, 2020

Market timing risk can't be solved analytically; the right questions are whether you believe in the future the founder sees and whether they are the right person to execute it

She has been wrong on timing before — companies she backed failed too early and someone else succeeded five years later — so belief in the vision and the operator is what she can actually underwrite

Scope: she accepts she is not always right on timing

16:13 20VC: Cyan Banister on Her Relationship To Money, Risk, Her Investment Decision-Making Process, Why We Will See A Reckoning in the Early Stage Market, Her Biggest Takeaways from HQ Trivia & The Future of Silicon Valley

Craig Courtemanche · Dec 4, 2023

Procore's slow first decade of growth was caused by construction job sites having no internet or mobile technology, not by the product or approach

In 2002 no job site in the world had internet; he had built vertical SaaS for an industry that literally could not use it — the iPhone only arrived in 2007 and the iPad in 2011

10:53 20VC: From Construction Worker to Billionaire CEO; The 21-Year Epic Journey of Procore to an $8.6BN Company, Advice from Tobi at Shopify on Being a Great CEO & Why The Idea of "Becoming an Entrepreneur" is BS with Tooey Courtemanche

Ed Sim · Jan 10, 2024

Entirely new markets like AI security appear unpredictably and investors are not smart enough to foresee them — crazy founders are the ones who see them

They funded Protect AI in early 2022 on a thesis that a seminal AI security event would come in three years, and didn't anticipate GPT arriving that same year and making AI security a big deal immediately

55:34 20VC: Did Figma Kill M&A Markets in 2024, The Three Biggest Mistakes Made in Growth Investing, The Three Requirements Companies Need to Go Public in 2024 with Ed Sim and Jamin Ball

Tom Hulme · May 8, 2024

Being too early is tantamount to being wrong unless the company can survive long enough for the market to come to it

Most ideas he's been excited about have been attempted before; VR had many companies waiting for the market to arrive, so taking timing risk requires cockroach mode and the muscle to endure

Scope: accepts the 'no new ideas' framing as statistically probably true

23:23 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber

David Schneider · Sep 11, 2024

You can be too early in a market, and it's hard to know you were too early until after you've made the investment

25:21 20VC: Scaling ServiceNow to $5BN in ARR | Leadership Lessons from Doug Leone, Frank Slootman and Bill McDermott | VC Value Add: Is it Real and Why the Worst VCs are "Seagull VCs"

Harry Stebbings · Oct 1, 2020

Investors should avoid taking market timing risk

There are already so many other risks in venture that stacking market timing and consumer adoption risk on top is frightening

18:47 20VC: What Is Founder Narrative Fit and How to Detect and Invest In It, How To Avoid Consensus Thinking When Investing, Price Sensititivity; When To Pay Up vs Stay Disciplined & From New York Times To General Catalyst; Why Venture and Journalism are Not S

Harry Stebbings · Jan 16, 2023

Market timing is the one risk he prefers not to take as an investor

He is wary of the market's intelligence relative to his own naivety

22:59 20VC: a16z's Jeff Jordan on The Ultimate Guide to Investing in Marketplaces, Two Core Features to Look for in All Marketplace Investments, Why Fragmented Supply is so Important & Lessons from Airbnb, Pinterest and Instacart on What Makes the Best Cohorts

Harry Stebbings · May 8, 2023

He avoids market timing risk and wants products where demand is known to exist once launched

Scope: stated as personal investing preference

33:09 20VC: Why VC Subsidizes the Wrong Type of Business, Why Capital Gains Tax is Crazy, The Biggest Misalignments Between VCs, Founders and LPs, Why Business Model - Product Fit is as Important as Product-Market-Fit with Chris Paik @ Pace Capital

Jeff Jordan · Jan 16, 2023

There are no bad ideas, only bad timing — categories like blue collar jobs, home services and rentals remain unconquered but are still winnable

The Craigslist unbundling meme shows category after category being taken (rideshare, homeshare, dating) with only a few big ones left; nobody has conquered these yet

Scope: concedes no one has cracked these categories to date

34:05 20VC: a16z's Jeff Jordan on The Ultimate Guide to Investing in Marketplaces, Two Core Features to Look for in All Marketplace Investments, Why Fragmented Supply is so Important & Lessons from Airbnb, Pinterest and Instacart on What Makes the Best Cohorts

Harry Stebbings · May 8, 2024

There is no such thing as a new idea — everything has been tried before, just possibly at the wrong time

Scope: Harry is unsure which of the two said it

23:11 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber

Tomasz Tunguz · Apr 21, 2023

Market timing risk can be managed by looking for pipeline — if a strong pipeline exists you can have confidence the timing is right

It all comes down to customer need, and you can extrapolate one buyer's needs to another if you've surveyed a broad cross-section of the buyer population

Scope: requires broad understanding of the buyer population

26:38 20VC: Who Wins in AI; Startup vs Incumbent, Infrastructure vs Application Layer, Bundled vs Unbundled Providers | From 150 LP Meetings to Closing $230M for Fund I; The Fundraising Process, What Worked, What Didn't and Lessons Learned with Tomasz Tunguz

David Schneider · Sep 11, 2024

Timing risk should be assessed by understanding the pain of the customer's existing approach and independently validating the founder's 'why now' through external research calls

If you don't know what you're solving for you can't judge timing; founders assert why now, and that assertion needs validation

25:33 20VC: Scaling ServiceNow to $5BN in ARR | Leadership Lessons from Doug Leone, Frank Slootman and Bill McDermott | VC Value Add: Is it Real and Why the Worst VCs are "Seagull VCs"

Katherine Boyle · Oct 1, 2020

Market timing risk should be distinguished from macro tailwinds: a tailwind merely accelerates and illuminates a cultural trend that already existed, so a company built for that trend would have worked without the macro event

COVID changed K-12 education by making parents aware of how and what their children learn, but the devolution of K-12 was already underway — an investment in K-12 infrastructure twelve months earlier could have built a massive business regardless; that differs from betting on whether autonomous vehicles reach the streets in five years

19:05 Macro tailwinds merely accelerate pre existing trends so are distinct from market timing risk

Kevin Ryan · Apr 10, 2024

Market timing risk isn't worth worrying about at the early stage; the right frame is whether a sector will be dramatically larger in ten years

It takes about ten years to build a really successful company, and a recession is almost guaranteed to occur in that window with unknowable timing, so the durable ten-year trend is the only assumption that matters

13:26 Focus on ten year sector growth trajectory not near term timing risk

Ilir Sela · Aug 4, 2023

The shift of pizzeria owners to mobile was foreseeable through study, so founding Slice was not a lucky bet on a moment in time

He studied the space and knew all owners would move to mobile eventually, even if the timeline was ten or twenty years, and then worked hard at it

38:36 Studying the industry can reliably foresee long term market shifts making timing not luck

Chris Paik · May 8, 2023

Being too early is just as bad as being too late; you have to be only one step ahead

It's like rock paper scissors — multiple steps ahead and you lose; going out to surf at midnight means you're toast

33:32 Must be only one step ahead not multiple steps early or late

Chris Paik · May 8, 2023 · hedged

The extra timing risk he takes is only incremental — still within timing the market properly rather than hubristically assuming you can create waves yourself

Going out to surf at 5AM instead of 6AM is a marginal bet, not disregard of factors outside your control

33:57 Incremental timing risk differs from hubristic wave creation

Chris Paik · May 8, 2023

The closer you are to the change itself, the less what looks like market timing risk actually is risk, because waves are truths spreading from very small consensus to global consensus

Non-consensus truths held by people close to the change are inevitable to become consensus, so insiders aren't really taking the timing risk outsiders perceive

34:32 Proximity to the change reduces perceived timing risk as truths spread to consensus

Craig Courtemanche · Dec 4, 2023

Procore's competitors died because they bet on adoption that hadn't happened yet — the internet still hadn't reached the job site — and winning required enough resources to survive from 2009 all the way to the 2015 inflection point

Procore grew from $0 to only $9.6M revenue between 2002 and 2015, and only accelerated after that; you had to outlast the whole pre-adoption period

14:47 Surviving to the inflection point determines who wins when a market was premature

Craig Courtemanche · Dec 4, 2023

The inflection came from the market changing to Procore, not from Procore changing — they had built the same product for thirteen years and the market finally adopted it

16:38 Market catching up not product changes explains the inflection