Narrative & Evidence

Something I've been thinking about: how NARRATIVE & EVIDENCE explain almost everything in startup investing

🧠 Narrative is what everyone believes - the popular truths in markets, trends, technology, the future, etc - these beliefs travel via substack, X, linkedin, podcasts, and the coffee shops of SF...

VCs have a bad habit of pushing self-serving narratives (I try not to do this)

Founders have a bad habit of trying to fit the narrative (a couple months ago a lot of startups were suddenly "openclaw for _____")

Narratives can change quickly, or they can stick around a long time. e.g. we are 3-4 years into a period of very powerful AI narratives (which are mostly correct imho)

Meanwhile...

🔬 Evidence is what's really happening - at companies, on teams, in people's lives where they may or may not be paying attention to any of YOUR narratives (plus they have their own narratives)

Evidence does not travel quickly, or with ease - it lives in dashboards and spreadsheets and 1:1 conversations

Evidence is much more durable than narrative (think of the public markets, where the narrative has turned against legacy SaaS while the evidence is that those companies are still making a ton of money)

Narrative drives fundraising, until it doesn't

In time, evidence usually wins - but by then, it may be too late

The relationship between narrative and evidence is very important to understand if you are an investor (or trying to raise money from investors)...

🖖 There are three zones that matter

1. Strong Narrative + Strong Evidence = the definition of consensus (founders will raise easily, but beware taking on too much at too high a price; if you're an investor, you'll have to pay up for quality)

2. Strong Narrative + Weak Evidence = where hype lives (high status founders can raise easily if they say the right incantations; investors have to be very careful or they'll deploy their whole fund in 12 months)

3. Weak Narrative + Strong Evidence = opportunity zone for the patient and courageous (this can be very frustrating for founders, and I get it! otoh we have made some of our best investments here but it feels bad to be non-consensus)

(most of the time, Weak Narrative + Weak Evidence = the death zone. only the financially independent, delusional, or truly visionary/persistent survive here)

My advice to both investors and founders is simple: Know what zone you're in and what game you're playing

☝️ The most important thing: the only way to break the zones is through INSIGHT - the third dimension

If you have real insight (not blind faith) about something, you can build/invest in ways that step outside this framework and create breakthrough opportunity

You might even make it in zone 4

Just keep in mind, the more you leverage insight, the more you have to become a teacher... to customers, to investors, to everyone you work with...

But the reward (as with all teaching!) is the opportunity for impact that goes FAR beyond conventional thinking