Venture Axioms: Core Principles for Smarter Startup Investing

Venture Axioms: General Rules and Philosophies for Better Investing

• Purpose: These axioms are not rigid rules but frameworks to help investors think critically about their decisions. Each investor will have different interpretations depending on sector and stage.
  

1. Deal Flow vs. Diligence

• Many investors overvalue deal flow, often influenced by signalling (e.g. YC, VC backing).
  
• The speaker favours diligence, as quality can only be determined through rigorous analysis.
  
• Warning against overindexing on signalling value—a common investor pitfall.
  

2. Team vs. Idea

• Execution is key. A strong team with a decent idea is preferred over a weak team with a great idea.
  
• Ideas alone are cheap and plentiful—what matters is who can bring them to life.
  

3. Team vs. Market

• When comparing a rockstar team in a decent market vs. a good team in a massive market, the speaker prefers the latter.
  
• The reason: team performance may be 10–50x better, but market size can vary by 1,000x or more. Bigger markets offer more room to win.
  

4. Defensibility

• Commonly asked of founders, but often misunderstood by investors.
  
• Early-stage companies rarely have real moats; things like patents and tech are overvalued.
  
  • Patents: hard to enforce, costly to defend.
    
  • Flywheels, data: only exist at scale.
    
• What is undervalued: distribution.
  
  • Distribution builds early momentum and scale.
    
  • In software, product features are easy to copy—distribution and business model matter more.
    

Recommended reading: “Where to Go After Product-Market Fit” — interview with Ilya Gill and Marc Andreessen discussing software defensibility.