Should investors buy into out-of-favor categories or follow market momentum?

Rob Go · Jun 23, 2023

A good old-fashioned enterprise software Series A with good metrics that isn't doing or pretending to do AI is an attractive deal.

Scope: requires good metrics

46:50 20VC: How to Raise a Venture Fund from Deck to First Meetings to Final Close, Why Venture is a Young Person's Game and Why Multi-Stage Funds Have Not Ruined Seed with Rob Go, Co-Founder @ Nextview

David Frankel · Oct 14, 2024

Unloved old markets like DTC still contain great investments; Smalls, a cat food company, is one of Founder Collective's best portfolio companies despite being unfundable in the market.

At $50M ARR nobody would look at the company because DTC is considered dead and cats get no love relative to dogs, and investors extrapolate from failures like Farmer's Dog-style dog food bets.

4:05 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Harry Stebbings · Oct 14, 2024

Vertical SaaS is an opportunity precisely because investors are abandoning it believing it is unattractive

Everyone is moving out of the category, which creates room for those who stay

63:45 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Harry Stebbings · Mar 19, 2025 · hedged

Venture investors have always been herd-like rather than only since 2021, which is why out-of-favour categories like fintech or web three likely offer bargain pricing today

The industry is the most cult-like, herd-following group, so prices in unfashionable areas get left behind

Scope: unsure web three is still a thing

28:58 20VC: The 10 Question Framework a $217BN Manager Uses to Make Investment Decisions | Lessons from Turning Down Stripe, Coinbase and Losing Money on Northvault | The Bull Case for Bytedance | How Anduril Could Be a $200BN Company with Peter Singlehurst

Byron Deeter · Aug 25, 2025

Alpha in venture comes from being not only right but contrarian, so vertical SaaS being unfashionable right now is an advantage for investors who stay in it

You get counter-cycles when you hold a contrarian correct view, and while others are distracted you can stick with great founders in great markets and be rewarded over time

13:04 20VC: Do Margins Matter in AI? | Is Defensibility Gone For Good? | Is Vertical SaaS Dead in a World of AI | What SaaS Rules Are BS and No Longer Apply in a World of AI | The Future of Venture: Why Chanel vs Walmart is BS with Byron Deeter

David Frankel · Aug 8, 2026

He invests as a value investor and opportunist — the interesting moments are when nobody else is funding a great person or a category with lower multiples like consumer — and is immune to hype cycles.

A consumer company can be an internet acquisition device with founders who are better at acquisition, even though consumer multiples are lower.

25:11 20VC: The AI Boom Will Create Enormous Roadkill: Who Wins & Loses | Why Founders Should Never Take Multi-Stage Money at Seed | Why Triple, Triple, Double, Double is Good Enough

Chris Dixon · Mar 27, 2024

There are two workable venture strategies — 'heat seeking' (winning the deal everyone in Silicon Valley wants) and 'truffle hunting' (having a thesis nobody else has) — and both can work as long as a firm knows which it is doing and leans into it

They are fundamentally different games requiring different capabilities; Union Square Ventures seeing Web 2.0 in 2005 is the truffle-hunting archetype, a hot foundation-model team out of Google is the heat-seeking one

10:49 20VC: a16z's Chris Dixon on Who Will Win the Next Generation of Venture, The Two Ways to Make Great Venture Investments and Find the Best Entrepreneurs & Why AI Will Strengthen the Position of the Incumbents Moving Forward

Harry Stebbings · Sep 6, 2024

There are two ways to win in venture — being contrarian and right where there is no competition, or picking a consensus winner and beating others with better cash — and the non-contrarian path is genuinely viable.

Scope: applies across stages

16:14 20VC: Why VC is a Ponzi Scheme Today | Why Most VCs are Bankers | Why Big VCs Ruin Startups | Why Incentives in VC are Broken | Why American Dynamism is a Tool for VCs to Raise Money with Nick Chirls, Asylum Ventures

Miles Clements · Mar 9, 2026

Triple-triple-double-double is not dead; you can do well investing in consensus and in non-consensus companies, but you get hammered sitting in the middle

Growth rate is only one of many inputs; a company not growing 15x can still be a very interesting investment given the other inputs

14:15 20VC: Inside Accel's $4BN Growth Investing Machine | Cursor is Dead is Total BS: Here is Why | What Missing Rippling and ElevenLabs Taught Us | Are $2BN-$10BN IPOs Dead | Why Now is a Great Time to be Thoma Bravo with Miles Clements

Miles Clements · Mar 9, 2026

An investor should both fight in competitive processes they have no right to win and back non-consensus founders — bootstrapped companies, far-from-Silicon-Valley geographies, ideas others find silly

Losing sometimes proves you are chasing competitive enough things, while non-consensus bets are where others haven't wrapped their heads around the opportunity

29:29 20VC: Inside Accel's $4BN Growth Investing Machine | Cursor is Dead is Total BS: Here is Why | What Missing Rippling and ElevenLabs Taught Us | Are $2BN-$10BN IPOs Dead | Why Now is a Great Time to be Thoma Bravo with Miles Clements

Brad Gerstner · Oct 10, 2022

Investing based on what your peers are all calling the winner is momentum trend-following, and its track record in venture is poor; venture returns have accrued to first-principles thinkers who identify what they want to own and go find it rather than waiting for founders to arrive.

Doing a thousand hours of your own work makes your mind 'fertile and prepared' to recognize the right company when it appears — as with the walk with Mike Speiser that led to Snowflake.

12:20 20VC: Altimeter's Brad Gerstner on Why Supercycles and the Powerlaw is the Most Important Thing In Investing, Why Portfolio Diversification is the Opposite of Risk Mitigation and The #1 Question Brad Asks All New Recruits

Mike Krieger · Feb 22, 2023

Investing because an area is hyped rather than because you love it is a reliable mistake

On reflecting on his own LP positions and angel investments, the bad ones were those he did because lots of people were excited about the thing

Scope: admits it's a lesson he has to keep relearning

54:20 20VC: Instagram Founders Kevin Systrom and Mike Krieger on Why Social Networks Should Be Less Social & The Next Wave of Social | Why San Francisco Will Return with a Vengeance and The Future For Remote Work | Let's Get Personal: Relationships to Money, Be

Trae Stephens · Apr 3, 2024

Hype is not aligned with outcomes and is often negatively correlated with them, so when something feels consensus you should run away from it

This was the most critical lesson from Thiel given what the industry went through in 2020-2021

64:46 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Harry Stebbings · Oct 2, 2023

Generalizing from a single win or loss to a whole category is wrong in both directions — the outcome may have been about the founder, market timing, or distribution rather than the area — so every new deal requires plasticity

Neither 'that area is always great' nor 'you can't make money there' is right; there is always nuance

41:52 20VC: The Services Model of Venture Capital is Broken, The Best Founders Do Need Help, The Most Important Signals to Assess When Meeting Founders & Why Kids Bring Less Happiness and More Joy with Phin Barnes @ TheGP

Mark Goldberg · Oct 25, 2024

Investors should play the game on the field: despite genuinely ridiculous deals with bad risk-return profiles, this vintage still contains good companies worth backing

Good companies are emerging in this vintage, so there's plenty of work to do even around the overpriced deals

Scope: acknowledges some deals don't fit a sensible risk-return profile

17:45 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Gokul Rajaram · Mar 16, 2026

Writing off entire categories as good or bad is the biggest investing error; every category contains great companies and you must judge each company's specific differentiation

He dismissed Quince at a $100M valuation because D2C was out of favor, missing that it had a 35-40% repeat purchase rate — higher retention than most consumer apps — and it later raised at $10B

64:21 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

Hunter Walk · Jan 30, 2023

In a bull market it is not just that rounds are bigger and higher priced — rounds get done that otherwise wouldn't, and prematurely, because everyone holds a rosy picture of the outcome

Investors pile onto companies others have noticed rather than waiting for more cards to be turned over; even companies you have questions about raise healthy rounds

31:49 20VC: Homebrew's Hunter Walk and Satya Patel on Why $100M is Not Enough To Execute a Seed Strategy Today | Why They Decided not to Raise New External Funds | Where Are We in the Cycle & What is Truly F***** | Why Founders Should Take Secondaries Earlier

Harry Stebbings · Mar 9, 2026 · hedged

Essentially all venture firms are momentum chasing to some degree, as shown by the industry's entries into AI and defense

Scope: 'slightly' momentum chasing

33:57 20VC: Inside Accel's $4BN Growth Investing Machine | Cursor is Dead is Total BS: Here is Why | What Missing Rippling and ElevenLabs Taught Us | Are $2BN-$10BN IPOs Dead | Why Now is a Great Time to be Thoma Bravo with Miles Clements

Everett Randle · Nov 10, 2025

He was wrong to dismiss AI inference cloud businesses like CoreWeave as low-margin compute middlemen; when demand is this strong, investors should stop over-analysing business quality and invest with the momentum

CoreWeave is a ~$60B public company and Nebius ~$30B, with over $100B of public market cap in the category and private players growing astronomically; the cohorted demand curve for AI inference is even stronger than for the initial hyperscaler clouds

Scope: stated as a change of mind over the last two years; 'the market's down a little bit'

28:10 20VC: Benchmark's Newest General Partner Ev Randle on Why Margins Matter Less in AI | Why Mega Funds Will Not Produce Good Returns | OpenAI vs Anthropic: What Happens and Who Wins Coding | Investing Lessons from Peter Thiel and Mamoon Hamid

Miles Clements · Mar 9, 2026

Chasing momentum is justified where the business intrinsics are as obvious as the momentum, as with Anthropic's value as a technology partner to the rest of the portfolio

Anthropic's momentum is obvious but so is the underlying business logic, making a relationship with them clearly worthwhile

Scope: dislikes the 'momentum' vocabulary; case-by-case, a matter of portfolio theory

34:06 20VC: Inside Accel's $4BN Growth Investing Machine | Cursor is Dead is Total BS: Here is Why | What Missing Rippling and ElevenLabs Taught Us | Are $2BN-$10BN IPOs Dead | Why Now is a Great Time to be Thoma Bravo with Miles Clements

Eric Vishria · Sep 25, 2024

Investors must stay aware of the prevailing market environment but can choose how much to participate in it, including choosing to sit out almost entirely.

The game is the game — you can't change it, but you control your own level of participation, as when the firm made only three new investments in the 2021 frenzy and has no regrets.

35:52 20VC: Benchmark's Eric Vishria on Where is the Value in AI: Chips, Models or Apps | Why Nvidia Will Not Be The Only Game in Town | The Commoditisation of Foundation Models | Which AI Apps Have Sustaining Value vs Hype and Short Term Revenue

Mike Maples · Jan 6, 2025

If you have a well-defined circle of competence, your deal pace should fall when everything is systematically overpriced and rise when things are underpriced

Fewer or more deals meet your fixed conditions depending on the pricing environment; he learned this framing from Buffett and Munger, and Ann funding Lyft at $5.5M post in 2009 when everyone was fearful is the underpriced case

18:49 20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate

Larry Aschebrook · Jun 16, 2025

The right move when a company is in visible crisis but insiders are doubling down is to buy from frightened holders at a discount rather than follow sentiment

The record labels exercised their option to buy more shares — information nobody else had — so buying at a 50% discount to the current round from scared sellers was the counterintuitive but correct bet

Scope: framed around the specific Spotify situation where they had non-public signal

27:03 20VC: How We Made $800M on Coursera | We Lost Money on Uber and Made Money on Lyft | We Did 3x on Postmates in 18 Months | DPI is King, MOIC is BS | We Dodged Theranos and I Still Lost Millions with Larry Aschebrook @ G Squared

Larry Aschebrook · Jun 16, 2025

The COVID panic was a great buying opportunity in secondaries — sellers were mispricing good businesses like Toast and Asana

People were 'running out the front door because their house is on fire' while they ran in with capital; Toast is now ~3x net from 2018

Scope: specific to COVID-era secondary pricing

54:07 20VC: How We Made $800M on Coursera | We Lost Money on Uber and Made Money on Lyft | We Did 3x on Postmates in 18 Months | DPI is King, MOIC is BS | We Dodged Theranos and I Still Lost Millions with Larry Aschebrook @ G Squared

Mark Suster · May 1, 2024

Investors deploy the most capital right as markets are about to peak, and then sell when markets fall because they cannot absorb further losses

When people start marking losses they conclude they can't absorb them, so they sell into weakness

0:00 20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?

Tom Hulme · May 8, 2024

Fear is a primary driver that wrecks venture returns, exaggerating the worst behaviours in decision making

It's a herd phenomenon that moves in waves — ZIRP-era fear was FOMO and heat-seeking into deals without doing the work, and the pendulum has now swung to fear of looking stupid, paralysing investing over worries about catching a falling knife or a down round

Scope: momentum investing can be a viable strategy if you can get out, though not one he'd be comfortable with

54:16 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

Roger Ehrenberg · Feb 19, 2024 · hedged

It is a good time to be a buyer of assets if you have a long time horizon

He exited IA near the peak and the last couple of years have been very challenging, so buy-side positioning now is favorable

Scope: requires a long time horizon

5:59 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital

Mark Suster · May 1, 2024

Investors put the most money in just before the market peaks, which is the opposite of correct behavior: you should sell into run-ups and buy into falling markets, though doing so is psychologically very hard

After three years of every check being worth more each quarter, the whole market piles in — and his own 2008-2009 dollar-cost-averaging into the crash was stressful precisely because each check was worth less weeks later

21:48 20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?

Phin Barnes · Oct 2, 2023

Evaluating Warby Parker's team against the ModCloth lesson — that a founder needed deep domain and design expertise — would have been the wrong test, because their real edge was supply chain and direct-to-consumer go-to-market

The glasses had to look good but that wasn't the point; ModCloth worked because the founder was a vintage clothing buyer, and applying that rule would have meant demanding a Luxottica designer on the Warby team

42:27 Applying one companys success factor as a universal test misjudges a different companys real edge

Mamoon Hamid · Oct 21, 2024

Investors should back companies against negative market signal when the pessimism reflects a market dislocation rather than a problem with the company or its founders

Venture is the risk business and you believe in the people; at Box the market was simply afraid during the global financial crisis and didn't understand cloud storage, while Aaron Levie and Dylan Smith were legendary founders

24:31 Back companies against market fear when pessimism reflects macro dislocation not company fault

Nick Chirls · Sep 6, 2024

The venture market runs on a copycat momentum cycle — a new company defines a category, big firms that missed it issue a siren call, and small firms scramble to find lookalikes — and playing that catch-up game does not make money.

By the time the category is legible, everything in it is priced at 25 or 30 post; the investments needed to be made years earlier when nobody cared.

14:37 Chasing legible categories after they are priced is a losing catch up game

Nigel Morris · May 24, 2021

Investors should hold perspective through cycles: things are never as good as they seem in booms nor as bad as they seem in the worst times

He learned this from experience and pushes his team to keep balance rather than only looking up the ladder

22:32 Maintain balanced perspective through cycles things are never as good in booms nor as bad in busts

Kevin Hartz · Jul 22, 2024

The Series B/C stage is far from dead and has been a great place to invest, especially during the quiet period of about eighteen months ago

When it was 'crickets' at that stage it was a great time to be investing there

27:20 Series b c stage quiet periods are actually the best time to invest

Akin Babayigit · Jun 26, 2023

Valuations today are a measure of the market's FOMO for a business rather than a meaningful heuristic for future cash flows

During COVID almost anyone starting a gaming company could get funded at a $100m valuation, showing the number reflects market perception of the domain, not the business

36:43 Valuations measure market fomo not future cash flow fundamentals

Eric Paley · Sep 20, 2023

2021 was an outstanding time to be a seller and a terrible time to be a buyer, and any investor who didn't see that was purely playing momentum

There are good times to be a buyer and good times to be a seller in venture and it is rarely both at once; intelligent buying was very hard at those prices

52:36 2021 was a selling not buying window failing to see that was pure momentum chasing

Peter Singlehurst · Mar 19, 2025

Capital is herding into a much smaller number of names because the industry is still digesting the trauma of 2021 and the 2022 pullback, and traumatised ecosystems seek safety by not deviating from what peers are doing

Human psychology after a traumatic period drives people to seek safety in conformity

28:35 Post 2021 trauma drives herd safety seeking into a narrow set of names

Larry Aschebrook · Jun 16, 2025

A short-duration fund thesis can play the momentum game as long as you are not caught at the end of the cycle

Their earlier vintages sold massively into the 2021 melt-up and made ridiculous sums, which set the business up to survive a bad 2020 vintage

32:55 Short duration strategy rides momentum successfully if exited before the cycle turns

Harry Stebbings · May 8, 2024

Most investors simply listen to podcasts and repeat what they hear, which is a viable strategy — certainly for momentum investing

8:26 Copying podcast driven consensus is a viable momentum strategy

Tom Hulme · May 8, 2024

His winners were fundamental businesses that compounded for a decade, while the momentum plays that looked good quickly went to zero

GoCardless was never a hot business but grew to nine-figure ARR from YC over a decade, whereas his fab.com and Jawbone-acquired positions looked valuable briefly and ended at zero, with no liquidity available to exit in the interim

15:48 Fundamentals compounding over a decade beat hot momentum plays

Harry Stebbings · Aug 8, 2026

Investors should not fight market sentiment — swim in the swim lane going in your favor rather than backing categories the market prices poorly, because the market can stay irrational longer than you can stay solvent.

Wix trading at ~$2.1B on ~$2.1B of revenue shows that even where rationality argues otherwise, market pricing is what it is and no amount of acquisition skill changes a category's multiple.

25:56 Swim with market sentiment multiples will not rerate

Harry Stebbings · Aug 8, 2026

The opportunity cost of holding cash is so real that momentum-following can beat the contrarian value trade, at least in the short term

He put money into Palantir as a 'momentum surfer' and did better than the contrarian basket approach

41:05 Momentum beats contrarian value at least in the short term

Adam Fisher · Jan 22, 2024

An investor should not go fully contrarian: the company must be non-mainstream but still fundable by other investors in the next round

It is so easy to fail simply by being unable to raise the next round, so ensuring the next round is accessible is a critical part of the strategy

18:05 Non mainstream but still fundable by others is the right degree of contrarianism

Saam Motamedi · Jul 15, 2024

Playing the game on the field — investing at whatever prices the market sets — would have cost investors dearly at many points in time.

0:00 Blindly paying whatever the market sets has historically cost investors dearly