Scuttlebutt & Seed
One of the best tools I’ve found to understand a market or company opportunity is the cross-sectional view, what Phil Fisher calls “scuttlebutt.” How do competitors, customers, investors, current & former employees all perceive a company and its products? As one spends more time building these cross-sectional perspectives, the understanding of a space compounds on itself.
Seed investing can often be a mode of scuttlebutt research for markets in their formation stage. Markets tend to bubble up with companies arriving in clumps and clusters — this year, it was permutations of Airtable and Plaid — and going through the very motion of early stage investing over a few months or a year can land you in front of competitors vying for a similar prize, building on a dimensional view. The tradeoff made with receiving this lens into new markets, technologies, and products is potentially a lack of ability to make the most of it. The window of opportunity for seed investments is tight with limited bites at the apple.
I joke with my friends in traditional venture or growth that they have the luxury of time to let a market play out a bit, but I’ll concede the competition they face is stiff. I may have taken a view towards investing that hinges on consistently picking category-defining or market-dominant companies, when there’s less pressure to do so as AUM decreases. Yet, the possibility of being involved with those businesses that grow for years and define generations is the allure of the venture business — there’s always an opportunity cost with missing, regardless of stage.