Unicorn VC Heard Mentality > Potentially Precarious Situations

When everyone is piling into the same sector, it’s easy to inflate valuations beyond reasonable levels. The result? When reality fails to meet these lofty expectations, the bubble bursts, leaving startups in ruin and investors nursing their wounds. 

Following The Herd Leads To Inferior Outcomes

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Lessons Learned From Studying The Herd Mentality Of Venture Capitalists

Julian Teicke

Contributor

I’m the Founder & CEO of wefox.

Venture Capitalists (VCs) are often regarded as the architects of innovation, providing the capital that fuels the growth of groundbreaking startups. Yet, the herd mentality in this high-stakes industry is becoming more and more pronounced, leading to potentially precarious situations. As AI dominates the current debate, is it time for a much-needed reevaluation?

In recent years, the world of VCs is like a continuous race from one zeitgeist to the next - like micro mobility, last mile delivery, crypto, or SPACs. If AI is the word on everyone's lips today, the response is almost Pavlovian. Almost every startup morphes overnight into an AI enterprise to catch the attention of VCs, and meetings are becoming increasingly exclusive to AI pitches.

This scenario mirrors a familiar human behavior: the herd mentality. When one person starts clapping, soon the entire room joins in applause. Or, think about the school playground, where one kid picks up a new game, and suddenly everyone wants in. It's seemingly natural but poses a distinct issue when applied to venture capital investments. We must be alive to the allure of the bandwagon. . .

Go to the source for more > Forbes FinTech