New VCs are vulnerable to fashionable verticals. What are some motivations to chase the market? Groupthink certainly; high volume of new companies in these spaces; perceived appetite for these companies from downstream investors mean you can get some quick markups over next 12 months.
Remember a few years ago when every VC seemed to want to back their own “something sent to you each month in a box” companies?
(1) This isn’t just a risk for new investments. VCs also need to resist recommending that their existing portfolio companies chase the shiny new thing, instead of staying focused on their core opportunity.
(2) One of the ways VCs can add meaningful value is by sharing what’s working from their other startups. The challenge is to share what’s working elsewhere without chasing fashionable verticals, and without making recommendations that ignore a company’s unique DNA.