About This Episode

In this episode of Practical Nerds, Patric and Shub explore a critical question for venture capitalists: how do you know when your investment playbook needs to evolve? Drawing parallels from the evolution of software companies (from on-premise to SaaS) and the mobile app revolution, they discuss the challenge of recognizing phase shifts in the market before it's too late. The conversation examines strategies for staying relevant in venture capital, from focusing on timeless founder qualities to actively hunting emerging markets, with particular relevance for investors in construction tech, supply chain, and deep tech spaces.

In This Episode

Why successful investment strategies eventually become obsolete and how VCs can recognize when they're in the middle of a phase shift

The danger of confirmation bias when evaluating founders, including real examples of VCs using irrelevant criteria like "was a debater in high school" to justify investments

How the transition from e-commerce to enterprise SaaS left many investors struggling to adapt, and what this means for construction and supply chain investors today

Five distinct strategies VCs can use to stay relevant: refining founder taste, moving to growth stage, building massive portfolios, developing prepared minds for emerging markets, or trying to be experts in everything

Why more than 50% of value in outperforming funds comes from emerging markets (geographic or thematic), making phase shift detection the core business of venture capital

The unique advantage millennials have in adapting to rapid change, having experienced the transition from offline to internet to mobile to social media firsthand

Timestamps

(00:00 ) Introduction and Severance reference(01:50 ) Why successful companies and investment strategies eventually fail(05:20 ) The software transition from on-premise to SaaS as a case study(10:00 ) The apprenticeship nature of venture capital and the Midas touch bias(12:30 ) How the mobile app era caught many investors off guard(15:20 ) Real examples of investors applying irrelevant B2C playbooks to construction and B2B companies(18:30 ) The challenge of evaluating "inventions" versus traditional startups in supply chain and deep tech(19:15 ) How do you know you're in a phase shift?(22:00 ) The information overload generation and constant phase shifts(26:40 ) Strategies for dealing with continuous market evolution(28:30 ) Strategy 1: Reverting to timeless founder evaluation(34:20 ) Real examples of poor founder evaluation criteria from investors(40:30 ) The confirmation bias in "founders who know their blind spots"(42:40 ) Why big VC firms struggle with hardware despite backing Intel and Apple(43:50 ) Strategy 2: Building prepared minds and picking emerging markets early(45:15 ) The Airbnb example and emerging category recognition(45:50 ) Fun anecdote about founder disputes post-funding

Resources or Companies Mentioned

Airbnb:

Microsoft

Adobe

SAP

Intuit

Autodesk

Apple

Nvidia

Intel

Anduril

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Patric Hellermann: ⁠⁠https://www.linkedin.com/in/aecvc/⁠⁠

Shub Bhattacharya: ⁠⁠https://www.linkedin.com/in/shubhankar-bhattacharya-a1063a3/⁠⁠

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#VentureCapital #ConstructionTech #EmergingMarkets