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There is an often less discussed point here about investing in developing markets. [1] Tweet here goes into more details. The gist is that investor distribution

There is an often less discussed point here about investing in developing markets. [1] Tweet here goes into more details. The gist is that investor distribution is barbell shaped. Hence, any company which crosses a particular chasm of raising say, $100M or so round (I made the number up, could be anything), more investors look at that as a safe bet and hence they raise further rounds. The credibility somewhat comes from the captable and market leadership. Not sure about other ecosystems though I think it will be a feature of many such ecosystems in growing economies. [1]: https://x.com/banglani/status/1691325750715326464 https://x.com/banglani/status/1691325750715326464

ignoramous 2y ago
> The credibility somewhat comes from the captable and market leadership. But frankly the most important reason investors like you more when you've started to raise money is that they're bad at judging startups. Judging startups is hard even for the best investors. The mediocre ones might as well be flipping coins. So when mediocre investors see that lots of other people want to invest in you, they assume there must be a reason. This leads to the phenomenon known in the Valley as the "hot deal," where you have more interest from investors than you can handle. https://paulgraham.com/herd.html https://paulgraham.com/herd.html / https://archive.ph/vkzMd https://archive.ph/vkzMd
- ankit219 2y ago
  This is true at early stage when there aren't many clear signals. When this is happening at the middle/late stage, where there is a clear market (created or existing), a mature product, and years of numbers/traction/track record to go by, then it puts ecosystems in a fix. That is what the tweet also points out. This is another advantage silicon valley likely has. There are more funds in middle stage who would lead a round and gives confidence to early stage investors to not look at much of the existing competition, unless it's too crowded a space.

ignoramous 2y ago

> The credibility somewhat comes from the captable and market leadership. But frankly the most important reason investors like you more when you've started to raise money is that they're bad at judging startups. Judging startups is hard even for the best investors. The mediocre ones might as well be flipping coins. So when mediocre investors see that lots of other people want to invest in you, they assume there must be a reason. This leads to the phenomenon known in the Valley as the "hot deal," where you have more interest from investors than you can handle. https://paulgraham.com/herd.html https://paulgraham.com/herd.html / https://archive.ph/vkzMd https://archive.ph/vkzMd

ankit219 2y ago
This is true at early stage when there aren't many clear signals. When this is happening at the middle/late stage, where there is a clear market (created or existing), a mature product, and years of numbers/traction/track record to go by, then it puts ecosystems in a fix. That is what the tweet also points out. This is another advantage silicon valley likely has. There are more funds in middle stage who would lead a round and gives confidence to early stage investors to not look at much of the existing competition, unless it's too crowded a space.