Key Takeaways

  • Venture Capital jobs are so good (high pay, no direct boss, flexible schedule, hard to get fired) that partners prioritize job security above all else.
  • This fear of losing a good job drives VCs to seek internal consensus and, more surprisingly, to "collude" with competitors to validate deals before bringing them to their own partners.
  • The goal of this 'collusion' is to ensure a deal isn't perceived as "dumb" by their peers, leading to widespread herd behavior and a lack of true contrarian thinking.
  • Only "richer investors" like Sequoia, or proven contrarians like Keith Rabois of Founders Fund, can afford to take outlier bets, as they are less fearful of LPs or the firm's reputation.

The Golden Handcuffs of Venture Capital

Ryan Peterson, the candid CEO of Flexport, pulls no punches on 20VC about why venture capitalists often exhibit a herd mentality. It isn't just about spotting trends; it's about job security. Peterson paints a vivid picture of the VC partner role: “it pays really well. Like if you're listening if you were listing like okay what if someone who likes to have a job what what would be the attributes like pays really well. You basically don't have a boss if you're once you're like a partner… It's very hard to measure if you're good or not on any reasonable time frame. So like you can't get fired.”

This idyllic setup, Peterson argues, creates an environment where partners prioritize holding onto their position. They're not just trying to make money; they're trying to not look stupid. The result is a deep-seated risk aversion, where the safest bet is often the one everyone else is already making.

The Silent Collusion That Kills Innovation

This desire for job security doesn't just foster internal consensus; it drives VCs to surprising extremes. Peterson claims VCs frequently "collude" not just within their firms, but often more with their competitors. The logic is chillingly simple: "VCs are constantly talking to each other in part cuz they need to make sure that they don't step out on the edge and do something that their own partners are going to think are dumb."

He doubles down on this: “I have a feeling that most VCs actually collude more with competitors than with their own partners because they don't want their they need to spot check their deal and make sure it's good before bringing it to the other partners to make sure that they're not seen as being dumb. So that's where you get the herd behavior.” For a founder, this means a truly contrarian idea, one that hasn't already been blessed by the market's gatekeepers, faces an uphill battle not because it's bad, but because it's different.

The Rare Breed Who Break The Mold

Not all VCs play this game. Peterson points to distinct outliers. He praises Keith Rabois of Founders Fund, known for his contrarian views, stating, “I love Keith Ra Boy who says that actually he likes to sense check his deals with friends and if they don't think that his deal is stupid or crazy, he's not doing his job.”

Peterson also highlights the very top-tier firms. “Like I think that richer investors make better investors,” he explains. Firms like Sequoia, with their established track records and massive funds, operate differently. “They are not fearful of LPS coming back for their next fund. They're not fearful of deployment speed compressing. So, you know, they just invest in what they think can be mega [__] companies.” These firms prioritize upside maximization, unburdened by the same job security anxieties that plague many others. They seek out the genuinely non-obvious, high-return opportunities rather than seeking validation from the herd.

What to Do With This

As a founder, understand that most VCs are playing a cautious game to protect their cushy jobs. When fundraising, don't chase universal consensus for your truly disruptive idea. Instead, strategically target investors who are either already so established they don't fear losing their position (like a Sequoia) or those who are proven contrarians (like Keith Rabois). Tailor your pitch to either validate an already emerging trend for the herd-minded, or aggressively challenge conventional wisdom when you're speaking to an outlier investor who actively seeks ideas that others deem "stupid or crazy."