Seed Round Hype Doesn't Guarantee Successful Companies

A prominent venture capitalist shares his experiences, highlighting the discrepancy between highly-coveted seed rounds and the ultimate success of companies.

• Contrary to popular belief, the author found that highly sought-after seed rounds are not indicative of a successful company.
• He argues that companies which received significant attention and competitive investment during their seed stage often underperformed.

The Success of Contrarian Investments

The author highlights the importance of contrarian thinking in successful venture capital investments. He reveals that many of his most successful investments were initially overlooked or deemed risky by other investors.

• For example, Stripe, Teespring, and Zenefits were initially dismissed by other investors, but ultimately achieved significant success.
• These companies were perceived as risky bets, but the author's contrarian view led to successful outcomes.

The Importance of Identifying Great Potential

The author emphasizes that identifying great potential in a company, even if it appears risky, is crucial for successful seed investing.

• Great companies often look like bad ideas at the beginning, and their seed round may be overpriced due to heightened interest.
• Investors should look beyond the hype and focus on the underlying potential of the company.

The Disconnect Between Fundraising and Company Success

The author explores the disconnect between fundraising prowess and the ability to build a successful company.

• He points out that being good at fundraising is not necessarily a reflection of the company's potential.
• Investors need to differentiate between fundraising capabilities and the underlying strength and vision of the company.

The Role of Risk Aversion in Seed Investing

The author discusses the role of risk aversion in seed investing, highlighting how it can hinder investors from recognizing truly groundbreaking opportunities.

• Investors often shy away from companies that appear risky, even if they have immense potential.
• The author suggests that successful seed investors need to embrace calculated risks and be willing to invest in companies that may seem unconventional.

The Importance of Ignoring the Hype

The author concludes by emphasizing the importance of ignoring the hype surrounding seed rounds and focusing on the fundamental potential of companies.

• Investors should not be swayed by the buzz and excitement surrounding a company's seed round, but rather focus on the underlying business model, team, and market potential.
• Investing in companies that have real potential, even if they are not the most sought-after in the market, is key to achieving long-term success.