I explained this last week on a call with some of our investors and I thought it might be useful to explain it more broadly.
Most of USV’s big wins have been in companies where we were the first institutional VC to talk to the company or where we had way more conviction about the opportunity than other investors at the time of our investment.
There was no social proof on these investments other than the fact that nobody else wanted to make the investment as much as we did. You can call it negative social proof.
I like to tell the story of when I met Brian Armstrong, the founder of our portfolio company Coinbase in the summer of 2012. Paul Graham had asked me to do office hours at Y Combinator and so I came to their offices and spent four hours meeting sixteen companies in back to back 15 minute pitches. At the end of the four hours, I walked out of the conference room and Paul was waiting for me. He asked “which ones did you like best?” and I replied “I like Coinbase. I think Brian Armstrong is on to something big.” He was surprised and said “You are the first VC to say that.” And I said “Then its going to be huge. Please make sure we get the call when they want to raise.”
That’s negative social proof. When nobody else likes the deal but you. That’s how you win big.