Contrarian Investing

My favorite investor is the contrarian. I know a lot of momentum investors that do well and I respect their approach to investing. But it is not an approach I can wrap my head around.

My favorite quote on contrarian investing is from Baron Rothschild who supposedly said:

the time to buy is when there is blood in the streets, even if the blood is your own

That is the kind of thinking that drove me to put a bunch of money into the market directly buying stocks in the fall of 2008, which I blogged about frequently here.

It was very hard to raise a venture fund focused entirely on early stage web investments in 2003 and 2004. Nobody thought that was a good idea. And that fund we raised will be the best venture fund I've ever been involved in. So I've had enough experience personally with contrarian thinking and excellent investments to know that it makes sense, at least to me.

I've been thinking a lot about what a contrarian would do in web investing right now. The easy answer is sit on the sidelines. But we are not paid to sit on the sidelines. We are expected to invest capital. In addition, I feel strongly about not trying to time markets. We like to put about the same amount of capital out year after year without too much variation.

We will only invest in things we know well so that takes non-web sectors off the table. Add to that our particular investment thesis around investing in large networks of engaged users and avoiding gatekeepers and you have a quandry.

I'm thinking a lot about this question these days so I thought I'd put it out there and see what you all think. Opinions of all sorts are welcome here, including the occasional kookery.

#VC & Technology

Comments (Archived):

  1. Connor Murphy

    “Be Fearful When Others Are Greedy And Greedy When Others Are Fearful” – Warren BuffettYour in very good company Fred 🙂

  2. Sebastian Marshall

    What a great quote – the Rothschild family have had a lot of brilliant from their bloodlines.… (patriarch of the whole family, genius)… (Mayer’s son, founder of the London branch)… (very intelligent statesmen, first Jewish member of the English House of Lords)The family is just full of brilliant, decisive people… reading about how Mayer sent his sons to the different European capitals is must-read reading for anyone who wants to build a dynasty in any discipline, doubly so if they want to do it in finance.

  3. John P

    You raise a great conundrum which is one of the key difficulties of being a contrarian. Often times the right move is to sit on the sidelines (as Munger would say: “practicing your assiduity by sitting on your ass” and doing nothing). Yet pressure from investors leads to an action bias that can lead managers to make less profitable choices in the long run.Having been in hi tech for over ten years, and now in finance, I see this difficulty equally in both areas.

  4. Jerome Camblain

    Investing in disruptive technology is contrarian by nature as you bet in changing the way people do things for ages and never thought about doing them differently before you show them an obvious improvement.If I link this to your previous post about P Thiel, I get to: 1- Globalization and science should bring wisdom and peace, more than chaos2- It also makes all financial markets/assets move more and more in tandem. Correlation moves to 1. The only uncorrellated asset out there is a team of smart people creating a company out of a good product that improves people way of doing things. This is contrarian, uncorrolated, untimed…and you have “a little” experience in this field…Not a bad place to be in today’s markets

    1. fredwilson

      that makes me feel a bit betteri think today’s post was all about creating an online support group: for me

      1. LIAD

        felt quite sad about the malaise you must be feeling to have to write the post.if you dont see exciting things coming round the corner, we’re really in trouble

        1. fredwilson

          don’t feel bad for me LIADthis is what is known as an “upper class problem”

          1. ShanaC

            Go hiking, it helps, and the weather is beautiful.

      2. Tereza

        Here’s how I look at it. It’s about insects.In chaos and armageddon, I am a cockroach. Nothing will kill me. I will figure some way out and I will multiply. I am resilient and tough.In peace, I am a tick. I find a nice place, burrow in and latch on for a piece of the cash flow…until it dies, and then I’ll find another host (a/k/a high-opportunity sector).Hopefully that cheers you up, Fred!

  5. Jens

    I personally like investment strategies that are based on a combination of contrarian and momentum:a) Markets are depressed at the timeb) But you can already see momentum building that will become apparent to everybody else soon. So you can buy cheap and get a good upswing on top of the corrective momentum.When you think it through, this aligns very nicely with how many VCs invest. I also recall that Roelof Botha had a presentation to that effect, although I can’t find it anywhere (does anybody had a link to this?). You invest just at the point when it is still not proven that things are great, but you can already see the momentum/potential.

  6. Dan Ramsden

    I think that on a macro-economic level, the issue boils down to one of deflationary versus inflationary environment ahead. In a deflationary environment, cash is the ultimate value, while in a (hyper)inflationary environment, equity is far superior. There is some evidence that we are heading into near-term deflation, followed by longer term inflation and possibly even high inflation. From this perspective, cash or cash-producing investments should be the way to go for at least a couple of years ahead… which, either way, may not be a bad call considering macro-economic uncertainties.On a sector-specific level, the key is in the exit environment. IPO seems shaky, despite a huge current pipeline of filings (as distinct from pricings… and post-IPO performance has recently been lame). M&A seems almost to follow a barbell pattern these days: mega deals on one end, helping large P&Ls improve in productivity, and small tech or HR acquisitions on the other. For VC, I think the in-between stuff is what helps to return funds, or at least small and mid-sized funds.On balance, cash or cash-producing assets are in my opinion becoming more and more the way to go. Even from a sector-specific perspective, this diminishes the pressure for exiting, or opens up other options.

  7. Alan Warms

    Here you go. In a world of massive notifications – every app, service is requiring or encouraging a check in, and people are getting bombarded with real-time data from every major service out there – Zynga, Google, Facebook, Yahoo, Apple — and everyone is now investing against all these services that sit on top of the notification infrastructure, I think there will be opportunity (again) in helping folks sort through all the noise. And I don’t think it’s all going to be social/flipboard driven – I think there will continue to be opportunities to create new, real brands that signifiy to people a way to quickly get through the clutter. So if Yahoo v1 was one of the first, then folks like RealClearPolitics and Drudge in the next wave, who will be next? Who will really be the brands to help the mainstream make sense of all this data and real time flow? Clearly at some level we’re trying to do that at and , but I think a much larger opportunity across EVERY major sector out there.

    1. fredwilson

      i agree but i don’t think that is contrarian Alwe are seeing a ton of startups in this sector

  8. LIAD

    The answers simple.When the going gets tough, the tough go to VEGAS BABY!

  9. RichardF

    I think it’s difficult to take the contrarian view about investing in the web per se unless you think that there is going to be an economic crash of cataclysmic proportions.It’s still relatively early days in what I’d say is a technological revolution and right now has to be one of the most exciting times to be involved in the web business. The opportunities are still limitless; location, search and mobile are all areas where the potential is huge and if you don’t invest then you are going to miss out, no doubt about that in my mind. You made a comment a few weeks back that you hadn’t seen anything new being presented to you for a long time and I’m wondering if that is one of the things that is driving your thinking.

  10. Philip J. Cortes

    What bothers me most is that (almost) every VC I’ve spoken to claims to be a “contrarian”. I’m not saying that you aren’t one, Fred, but what I am alluding to is the fact that if everyone is a contrarian….aren’t they consensus investors in the VC space then?Andy Rachleff spoke at Wharton recently and his point was that 98% of VC alpha is generated by 2% of the funds – the ones that are contrarian investors and right. Union Square certainly seems to be a firm within that top 2%, and its contrarian thesis has proven to do well.But wouldn’t a contrarian thesis within the VC space actually be to investing small pools of money into consensus type investments? Google’s first round of financing came two years after Yahoo had IPO’d! Facebook launched in the midst of a zoo of social networks (myspace,, etc). Wouldn’t it be contrarian of someone in the VC space to invest in companies entering proven verticals in the web space?

    1. ErikSchwartz

      Any VC who says to a entrepreneur:”We’ll invest in your company if you find a lead investor”Is not contrarian no matter what they claim. This is a very common phrase in the VC community (although I’ve never heard USV say it).

      1. PhilipSugar

        I should add that to my “screw you euphemisms”. Short, sweet, true.

  11. Antonio Tedesco

    If every instinct you have is wrong, then the opposite would have to be right.Yes, I will do the opposite….My name is George. I’m unemployed and I live with my parents.What’s the opposite of web investing – traditional enterprise software or should we corner the market on legal pads and pencils?

    1. Dave Pinsen

      That episode was on last night.

  12. William Mougayar

    Most innovative entrepreneurs are contrarian thinkers and investors too. Their ideas are often misunderstood while embryonic. They see things that others don’t (yet). Then, suddenly when there is market traction or other validations, they appear like geniuses. What is obvious to few is not obvious until it is obvious to many. At that time it’s too late unless your strategy is one of being a fast follower (momentum player).The more experience one has, the more they can accurately rely on their instincts and gut feels. Go east when all are going west.

  13. Pascal-Emmanuel Gobry

    That’s an excellent question. I’m stuck. I’ll come back to it though.

  14. panterosa,

    I would think being a contrarian would lead you to invest in more women owned/run businesses.

  15. Fred Destin

    At the risk of badly paraphrasing your strategy, assume the contrarian aspect is that you correctly anticipated was the “power of platforms” and related network economics and decided to invest in companies that not did not have any defined revenue model but that were or could be accreting users at network speeds and sat at interesting points in the value chain (i.e. usually right in front of the consumer). Hence the funding of a 140 character two-way broadcasting system, a social gaming platform, a location platform, none of which were obvious investments before they became self-evident successes. Prior to that I am looking at the likes of etsy predicated on a mix of social referencing and marketplace economics. Less disruptive but powerful.With a brand like yours and great syndicates the best team tended to flock to these startups and a self-fulfilling cycle of success would ensue. Nice!Now the power of social networks as platforms is established, a number of the core innovation buckets have been filled (music, gaming, video, location, real-time communication) and there has been very strong consolidation around all consuming leading properties (the new gatekeepers). So like in software 10 years ago, it’s innovation at the edges of the big white spaces (defined verticals, sub-groups, marginally better apps) leading to an absence of obvious “big hit” winners. Vertical after vertical will get populated but the outcomes are likely to be less extraordinary given how well understood the principles are.On top of that principles of ultra lean startups, positing ignorance, fail early fail fast etc as well as techniques of lead gen, seo, social marketing etc are the new gospel and increasingly well practice across the industry. Everyone talks in Steven Gary Blankese :-)So the ecosystem you anticipated exists, and it’s massively scalable, and it’s maturing fast.So what’s next ?I am as confused as you are (or profess to be :-)) about where the next big themes are, because they ain’t obvious and money is rushing in to keep filling every little gap left on the social web map with marginal utility or return profiles. Maybe we look at the problems created and solve them: can someone please solve privacy and identity for me, can someone free me from my mobile carrier, can someone save me from the complexity of managing my social graph and empower me to take back control. You’ve looked at hacking education, still feels there is a lot to do there. How about healthcare ? We need more empowerment of patients, a la Keas.In general I feel we are in the very early days of personal empowerment still. It may not be quite as elegant as the highly genericized services of fb or twitter’s, but there are big swathes of our lives where technology can meaningfully help that have not been addressed. Can we create lifelong relationship of trust with consumers to manage their health, their wealth, their preferences, their identity, their family?I also still believe we are only starting down the path of “platforms” in the sense of revised boundaries of the firm. If everything can be priced dynamically (including your attention) there must be so much work left to do in providing the data, the exchanges, the tools necessary to address these.Off the cuff and stream of consciousness so apologies for the rambling comment, really interested in seeing where this leads.

    1. LIAD

      what a great comment!would love to be able to write so cogently and succinctly.

      1. Paul Jozefak

        And imagine….doing this without being a native English speaker. Hats off Fred!

        1. ShanaC

          I didn’t know that. (Fred you go)

    2. awaldstein

      Great comment…especially:”In general I feel we are in the very early days of personal empowerment still. It may not be quite as elegant as the highly genericized services of fb or twitter’s, but there are big swathes of our lives where technology can meaningfully help that have not been addressed.”You mention health care. Been thinking a lot about our parents and the isolation that comes with aging and how social networks can add that connection to the elderly now that health sciences has extended life. Not much being done here that I know of. My thoughts @, there are huge industries that are just starting to disintermediate. Wine and spirits is the one I’m focusing a bit on. No coherent databases. No referral based economies. I’m sure there are others…maybe not as big, but ready for the social plunge.

    3. fredwilson

      great comment Fredwe should get together and talk this over face to facelots of great thoughts in here

      1. Fred Destin

        with pleasure

      2. reece

        If there is a meeting of the Freds, I’m happy to be the stenographer. 😉

    4. Nathan Lustig

      Good list of contrarian ideas. I’ll add one more. Digital afterlife, or what happens to your digital stuff after you die?Pretty much every internet company (rightly) focused on getting as many users as possible, as quickly as possible, but did not make any provision for what happens to user data when users pass away.There are a ton of opportunities around digital legacy, identity, privacy, digital inheritance, reputation management, digital memorialization, improved customer service, antifraud detection and many more.

      1. Gorilla44

        Check out“Entrustet is a free online service that allows you to securely list all of your digital assets, which are online accounts and files on your computer, and decide if you’d like them transferred to heirs or deleted when you pass away.” Company is located in Madison, WI.

    5. MartinEdic

      I think the wandering nature of this comment is justified!I’ve been thinking that a lot of business models these days are about the compression and expansion of time; compressing the time it takes to communicate, research and build, expanding the time we have to experience things by not spending so much time is one spot. If a business concept hits these sweet spots it is probably worth getting involved with even if the markets aren’t obvious.

    6. Josephams

      I liked your comments Fred – with regards to healthcare and co’s like Keas/PatientsLikeMe & PHP players, who are all about empowering patients – it’s a great idea, in theory. But actually I think in practice, a great area to focus right now is “empowering physicians/healthcare professionals” with data and then expect a trickle down effect to patients, sort of like building a supercar for race-car drivers with the hopes it’ll eventually lead to improvements for consumers. What I mean, is that there is currently an enormous amount of data, which physicians/hospitals have been collected and storming in some sort of electronic form dating back ~20 years…but we are doing NOTHING with it in practice, except staring at it on a monitor as if it were written on a piece of paper. I say “we” and include myself, a 4th year medical student, with a tech/startup background frustrated daily by the fact that there is no way for me or my colleagues to use our data to improve patient care.The answer to how to fix this is unclear – personally, I’m fascinated by the area of analytics called outlier/anomaly detection and doing my best to build software to use for this in my future healthcare practice & research. In terms of big picture, I’m hopeful that the my peers – current med students, residents, and young physicians – will push the envelop forward very soon, as we are not as threatened/overwhelmed by the data at our fingertips, as some current physicians may be. In summary, I believe a great area to invest in right now is building apps/software/infrastructure that will enable healthcare professionals to use all of the data they now or very shortly (2015 EHR push) have access to nationwide…and as a patient, as well as a future-MD, I hope that access & the ability to use this data will eventually trickle down to the patients.

      1. Tereza

        I agree I think we’ve only scratched the surface around data and analytics.

    7. David Noël

      Kudos for an extremely well put summary, Fred.Side note: it’s always Twitter, Foursquare and Zynga being mentioned as the rocking three out of USV’s portfolio. It’s funny to see Tumblr kept left out in many cases and I wonder why this is, they’re killing it.

      1. fredwilson

        there are at least a half dozen companies in our portfolio, including tumblr, that could work out as well for us as those three

    8. Stanislav Borisov

      I share the idea of “personal empowerment”. The next step for industry is to give back to users the power of being themselves – making decisions, having opinions etc. Everything we lost while we were playing by rules of consumer mass market. In mass market times one, two, even hundred individuals were out of scope for most of the businesses and services (except VIP). And today’s trend is to retain back the power. The power of being yourself. So I would bet on services and startups which supports this trend. Do they use generic platform or not doesn’t matter. Future services should have value “MADE FOR ME” in eyes of customers.

  16. Dave Pinsen

    If you have to invest in the web now (even though your gut seems to be telling you to sit on your hands), maybe the way to go is to invest in web services that try to address the economic insecurity of average Americans in some way. One idea that comes to mind is the one Mark Essel is working on, Garage Dollar. When people are broke, they often have to sell their possessions.In general though, try to see things from outside the bubble of affluent, urban, upwardly-mobile, early-adopters. There’s a big, anxious world out there, where competing to be the mayor of the local restaurant or watering hole isn’t foremost in peoples’ minds but finding a way to stop their personal economic slides is. Web services that can help with that might be worth looking at.

    1. LIAD

      so agree.bottom of the pyramid innovation is such a worthy cause and can also be financially lucrative.would be great to have a USV emerging market fund centered on disruptive innovations

    2. baba12

      You talk of the tectonic shifts taking place in bum fuck USA with regards to the economy.Unfortunately web services in most cases can at most provide a tool. Fundamentally for the societies that are caught in a downward spiral economically, only large investments made by the state in infrastructure can get them stabilized. No private venture capital investments will be made in such types of projects where the returns take much longer to materialize.Private sector jobs for the masses are dwindling and for most people retraining to be a programmer/bio tech expert etc is not an easy task.Maybe Mr.Wilson has his take on how web services could help stop the economic downward spiral that 17% ( that is the real number) unemployed folks are dealing with.To be fair USV and Mr.Wilson don’t have a mission to figure these things out and it would be wrong to expect that.

    3. Mark Essel

      Thanks Dave. I have a hunch that liquidating used goods is a bigger market than most give credit, and it’s not glamorous or Web 2.0 Hot (thanks to Mike Rowe for that perspective). Many in that market are just now getting on the mobile net. There’s a need to satisfy in bad times or good, and it’s about serendipitous discovery of nearby transient events. In the second hand market eBay hit a home run, but it’s far from done. That market will be around in bad or good times. If times are tight you’re more likely to want to have a sale instead of throwing stuff away. If things turn around they’ll be more consumption and more sales!Nothing get’s me fired up about Garagedollar more than fond memories of Red Foxx from Sanford and Son. Yeah I know junkyard, not garage sale but the markets overlap.

      1. fredwilson

        you should borrow something from Sanford and Son as your brand/domaingaragedollar isn’t bad but it is not really memorable

          1. RichardF

            remake of Steptoe and Son (one of the all time great comedies produced by the BBC) didn’t realise what Mark and Fred were referring to but get it now.

          2. Dave Pinsen

            I didn’t know that. I didn’t know we were recycling British comedies that far back. Incidentally, speaking of being contrarian: what could be more contrarian than looking for comedy ideas from Great Britain?________________________________

          3. RichardF

            We are due to produce some more great comedies soon Dave, it’s no coincidence imo that our best stuff (apart from The Office) has come during the economic tough times.

        1. Dave Pinsen

          Fred, for another Disqus issue, see my response to RichardF below. I responded via e-mail there, and the format typically gets eaten up like that when I respond via e-mail.

        2. Tereza

          Something like “pass it on”. Something of that sentiment.I hear “garage” and I smell mold.It can be really traumatic for people to put their stuff out there. De-cluttering, etc. Many have trouble letting go.I would noodle with stuff that addresses the idea that you got really good use of this stuff, it’s still good stuff, and now it’s going to go to the next good people who will use it and appreciate it.Can you draw something from the saying “one man’s trash is another one’s treasure”?

          1. Mark Essel

            You hit a nerve there. I’ve noticed that pack rack -itis that afflicts many folks. I have no qualms throwing stuff away or selling it if I’m not using it.I’ll have to bookmark that pain point, brilliant Tereza!

          2. Tereza

            Cool.Keep the sentiment positive.If you’re selling crap and people are buying crap, while it generates an immediate chuckle, it may not have the long-term legs you want for the business.Is your target customer male or female? Professional or amateur? That will influence where you go.Create a psychographic profile of your paying customer and work backward from there.

          3. fredwilson

            free consulting here at AVC, courtesy of Terezathis community rocks

          4. willwhutson

            seriously!i’ve been reading this thread for 20 minutes nodding my head.thanks all!

          5. Tereza

            Mark if you ever want to do a ‘customer interview’ on me, let me know.I had to singlehandedly liquidate my parent’s house in about a month.F*cking sucked.Sold, stored, donated, moved, trashed. Nightmare.Seriously when the second parent dies and the children are left to sell the house and get rid of stuff fast….there’s a legitimate “get rid of this stuff fast but be smart and respectful about it” thing going on.Also have you talked to professional organizers. They should be a great lead stream.Also real estate agents. They often have clients who need to de-clutter their house in order to sell it.When someone has been somewhere a long time, they don’t see what a mess it is.And then suddenly they have to solve the problem fast.Find the people who have to solve the problem fast.

          6. Mark Essel

            Ouch, rough situation but a common an unfortunately common occurrence.Profile of target customer and visitor: amateur sellerbookmarking talking to professional organizers, developing a list of pro-garage sellers/organizers, any idea how I can grow it quickly with high quality?I assumed real estate agents (most pros) go the dumpster route (I’ll follow this up, my mom did real estate for a few years).I’ll email you with the solution I’m working towards

          7. Tereza

            I was just suggesting the realtor as a channel — which if their listings or prospective listings need to purge or prune?it’s not the agent themselves thats doing it.

          8. PeterisP

            If a significant portion of real estate agents are going the dumpster route now, then they would be perfect potential paying customers for such a service if appropriate marketing gets them.

        3. gbattle

          good suggestion/reference Fred. how about these

      2. Laurent Boncenne could do the trick for the name =)

    4. fredwilson

      i like what mark is doing but he needs more listingsit’s a cold start problemi think a web crawl might be the answer

      1. Dave Pinsen

        The general idea is that there might be opportunities in web or mobile apps that ameliorate economic insecurities in some way.

        1. fredwilson

          i love this thinkingyou and andy and mark all pointed it outit’s spot on and is my favorite of all the ideas that are being shared today

          1. Rocky Agrawal

            this is part of the reason for the success of groupon, living social, etc. no?it’s pretty impressive that all of a sudden using discounts is almost considered chic/smart vs. previous views.

          2. Rob K

            I think it’s a big part of why Mint was successful- insight into expenditures

        2. Tereza

          Are there any mobile *savings* games out there?Enter in all the things you coveted but decided NOT to buy?:-)

          1. Dave Pinsen

            Not that I know of, but I’m not that familiar with the mobile space.________________________________

          2. Carl Rahn Griffith

            I have pondered the idea of a savings game for kids, but aligned to real banks, so the virtual currency they ‘buy’ or get gifted actually gets vested into real bank savings. Could be great PR for a bank… Jesus, they need it.Maybe I have said too much, lol.I usually do 😉

          3. Kenneth Younger III

            Not sure how “gaming” oriented it is, but it’s definitely social:

          4. Tereza

            I like it!I’m surprised there’s no mobile app. I’d be most interested in accessing it on the go, during little snippets of down time.Also I think there should be a kid’s version. Not sure how could link to allowance but I think that’s important and there surely is an easy way. They’d need a different setup wizard and user entry for that.

          5. Antony Evans

            we are exploring this concept to driving savings via mobile phone here in the Philippines

          6. Ken O'Berry

            We Geo has kind of a tack on that… it’s a service built around helping people work together to get things done – think collaborative management of activities. But in the average household, most of the things people have to track are things that take them out into the world in some fashion to spend money.While out accomplishing a task, it makes it easy to leverage location to find savings opportunities. Hey, what could be better than getting a coupon for dry cleaning, when your list says “drop off dry cleaning”. Maybe not sexy, but definitely has utility for us regular folks. If you enter how much you spent, you can see interesting lifestream style visualizations on how/when/where and categorically how you spend money.Regarding what you decide NOT to buy, if you covet an item, why not add it to your wish list. Your hubby needs more than subtle hints of what you’re wanting.Would love anyone’s thoughts on what we’ve built. It’s a 1.0 MVP with lots to do. But we just pushed it live last night and are proud and exhausted today 🙂

    5. Tereza

      Tell you what, as the Baby Boom ages, downsizes, and moves to Florida, there’s gonna be an onslaught of garage sales.

  17. Privileged Equity

    Fred, I wanted to start this comment by thanking you for sharing your thoughts day-in and day-out. I’m sure I am not alone in saying that your posts always entice a couple of minutes of reflection out of me each day, and have thus helped me achieve more within my own sphere of activity.This particular post on contrarian investing has grabbed my attention more than usual though, as it has been an ongoing contemplation of mine (though I have been thinking about the private equity asset class as a whole).My thoughts are still sketchy at this stage, but when it came to technology & growth investments, I have been eschewing the notion of “contrarian sectors” in favour of “contrarian geographies”. My reasoning behind this is that technlogy and growth investments rely much more on the abilities of its founders and employees than they do in other asset classes. Whilst people are relatively mobile, there are always reasons why they remain located in particular areas.With that in mind, a contrarian VC investor might concentrate on supporting start-ups in geographies that have fallen out of fashion – but where one might still expect to find high quality, backable teams.I know for example that the Cambridge ‘Silicon Fen’ (the high-tech cluster that has built up around Cambridge University) has seen a declining presence of institutional venture capital – local partnerships have relocated to London; larger funds have closed down their London offices etc.I understand you are probably limiting yourself to US-centric investments (if not due to your fund’s mandate, at least due to declining effectiveness as an investor once geographical distances become too great), but perhaps there are similar opportunities to be exploited in the USA?

    1. fredwilson

      we’ve done four european startupswe’d like to do more but it is tough investing that far from home

      1. Paola

        I am in Italy.I am a woman.I am working on a great idea and it relates to many of the issues you are argumenting here and is related to women and has a global appeal.Do we necessary need to make some great comments on this blog to get attention?I feel like when at school we had to catch professors attention somehow…plus I have a language issue since I am not expressing myself in my own language.I enjoy the blog mentality since anyone can participate even if just by listening, but the exclusion part of it is kind of disturbing…if you don’ t post, you don’ t exist.Still there are people around with great ideas but with language limits.Are there ways to confront your idea if you don’ t post?Should one just come up with something so smart to say just as a tool to be able to then get attention?This is what makes me unconfortable on this blog

        1. Toshi O.

          I think like most things in life, blogging or networking is a contact sport, and the only way you will be noticed is if you do/say/write something.I too am generally reserved, but have to think that the interactions that are made on this blog and others aren’t superficial and necessary to getting to known.If anything, hope this serves as an ice-breaker so you feel more comfortable coming back and posting.Buono Pascua (thats all i really know in Italian), to.

  18. chris dixon

    There are still plenty of contrarian bets to be made within web services. Everyone is piling into daily deals, social games etc. I was impressed with Brad Feld’s Stocktwits interview recently when he talked about new human-computer interfaces etc. Not on typical VCs roadmaps.

    1. fredwilson

      Yup. Brad is very long HCI and as an LP in his fund I am along for thatride. I don’t yet have the clarity of vision to invest there but I am gladhe does

      1. eric norlin

        I love the HCI stuff (see the new conference Brad and I are working on — Blur —, but I also think that investing in enterprise software is pretty contrarian at the moment.

        1. fredwilson

          agreed, but if IT is the gatekeeper, then we won’t invest in it

          1. Pascal-Emmanuel Gobry

            A bit of a tangent, but what do you think of the enterprise sales model of viral, bottom up adoption? Seems to be working for Yammer and you have invested in a couple of companies that sell to the enterprise — Amee, 10gen.

          2. BillSeitz

            I think if there’s a single coherent client-group in the company that becomes the champion, then it can get past IT. But when it’s a general broad capability (collaboration software), so that *everyone* is a target user, then you end up in checklist purgatory.

          3. Pascal-Emmanuel Gobry

            Interesting. Thanks.PEG

          4. ShanaC

            how do you get over the IT curve?

      2. ShanaC

        HCi is extremely difficult. It’s the science of getting the computer out of the way or in the way, and we know there is a lot of human variance already in how we behave.

        1. Aaron Klein

          Human variance is a piece of that, but even if we all acted the same all the time, there’s also the difficulty in the computer understanding when you want it to do something and when you don’t.I’m imagining yelling at my computer 10 years from now – “NO, don’t close that window! I was just winking at my son, for crying out loud.”I look forward to seeing what they come up with, but this is going to be a tough nut to crack.

          1. ShanaC

            Your car is a computer and you yell at is as car, not as a computer. The best HCi interfaces don’t destroy your sense of normalcyIt’s better than the one I heard of people’s fridges locking up: No, that is unlikely, you’ll just not have scrolly wheels to keep the fridge at a temperature. You’ll access that by some sort of panel, or a house “mainframe” will control it. Maybe there will be an rfdi chip reader, so you know how much milk you actually do have and when it spoils. And you get a list. It still won’t stop doing its primary function and freaking you out (that is keeping your food cold)HCi, really is the science of getting the computer out of the way so you can do stuff.

    2. niallsmart

      Chris – you just reminded me that “hardware” is another contrarian theme (and one that Foundry Group have some investments in, e.g., PogoPlug, SlingMedia).The emergence of COTS hardware platforms like PlugComputer have reduced the development/prototyping costs of hardware products to a level comparable with consumer web. That’s exciting because now folk with a mostly web/software background can get started in the game (and they can execute better on the user experience vs. most hardware companies)The question is how do you scale manufacturing and distribution. Will an online-only distribution strategy for hardware products work? Fred’s post about the capital required to scale a company is very relevant here.

      1. fredwilson

        we have really struggled with hardwarei don’t think we do those investments well

    3. Sachin Bhatevara

      Not an original idea, but came about during a discussion with a friend in the manufacturing/ automation space. There seem to be lot of web services/ applications for people- how about web services for things and how those could interact with web services for people. Seems like there is a whole lot of room for innovation in this space ( though don’t think web services for things is a contrarian play). Haven’t thought too much about this but Zip Car iphone app and things of that sort come to mind. Maybe there is a platform business in doing that.

  19. Douglas Crets

    Education, education, education.

    1. fredwilson

      I think you are right but we have yet to come across the right bet for us inthat sector

      1. ShanaC

        Please god something that is social and disrupts this thing known as Chalk. The teachers can’t figure out how to use it, and the students don’t have good tools to collaborate on. It makes working a nightmare.Oh and the college job search thing- The job search my school uses won’t let you seach by date. I actually tried writing to the CEO just for the feature (and if they could, export to google calendars, what century are they living in when dealing with college students) I got pushback, and I couldn’t get through, even though I made sure to look up the right email addresses and everything.Oh god the systems, they are terrible- I’m trying to figure out whom they are designed for.

        1. Fred Destin

          Stepping into a class room is the closest experience our kids will have to Victorian times. Forgot who said it but it rang true.

          1. ShanaC

            Not kids, students, nor administrators. I once saw a game designed to prepare students for Illinois student exams to get past NCLB mandates. That thing was not a game. I’m not sure what it was, but it was not a game, and it would not have helped the state pass through the NCLB mandate. Plus they gave 3rd graders confusing passwords.It’s true because kids are stuck in command control type environments, we’re very afraid of what kids will interact with. Let go, everyone, while not little people with the same needs as adults, they are individuals and they are smart enough to see through the fact that either a system or a figure is pulling the wool over their eyes. Bah.

          2. Tereza

            Actually at our public school they’re equipped with Smartboards.UK penetration of Smartboards is roughly 85%.I don’t have the latest data but they were growing at a very fast clip in the US, and schools who didn’t have budget have held outside fundraisers to get them equipped — as if it’s a panacea.My surprise in observing them in use is how crappy the slides look and how much content creation the teachers do themselves.Before I latched on to my current idea, I did a bit of exploration around creating and aggregator of teacher-created content for smartboards, where the teachers could share and make money and get recognized for their “killer slides”.Also at the time I was influenced by some of Gladwell’s talk of teachers, that there are excellent teachers but a bunch of mediocre ones, and if we could pipe decent “content” into the classrooms of the mediocre teachers then it might help them be “less bad” (even if they can never be excellent).After a few weeks I abandoned the idea, deciding it was either (a) a job to propose to the manufacturer of Smart Board, or (b) if a startup, it needs someone with deeper domain expertise in the education ‘industry’ than I, as the revenue path was not clear. It was going to have to involve digging into public school budgets (HARD! and LONG LEAD TIME!), or creating a value-prop where the parents pay.That was more complicated than I wanted to do.

          3. Ken O'Berry

            My wife is a 5th grade teacher who has recently had a smartboard installed in her class. Can you imagine having 17 years worth of lesson plans in MS Word and suddenly needing to be brought into the world of smartboards and interactivity? She’s smart and she’s struggling. I’d bet she’d see a market for this.

          4. Tereza

            I love the way you described that. I actually interviewed a bunch of teachers and observed some classes as well as some lesson planning. (looking directly at the end user’s process is always step #1 for me in thinking about a business).Teachers are teachers and they are not trained multimedia content creators.A lot of great ones also try to do a bit of lesson planning on the fly to make today’s lesson relevant to what’s happening in the outside world.SmartBoard and others offer training and also the textbook publishers are cranking out some content but (A) these teachers don’t have so much time for that kind of training and (B) We all know how textbooks are highly political and written by committee. The teachers I talked to said they’d never use something from the book bc it’s crap.Also it was also interesting to me how it seemed that teachers view their lessons as their own “intellectual property”. Some like to keep it close to the vest.But….if some teachers are particularly awesome at creating multimedia lessons and have road-tested them in the class, why shouldn’t they syndicate that content, let other teachers vote on and celebrate its fabulousness and use them for their lessons? And let the classroom content creators earn some coin on the side in addition to the status they get from having developed highly popular lessons?Anyway as I write this I still think there’s something there.I also talked to some investors who specialize in education and they said — they never invest in “Curriculum” because it’s so politically fraught….it’s too risky.Thing is, if you’re not affecting “curriculum”, I have to wonder…….are you helping the situation at all? 🙂

          5. Tereza

            Another piece that is ripe for disruption is high school transcripts.

    2. Dave Pinsen

      Bubble, bubble, bubble.

    3. christmasgorilla

      Most of the education stuff (textbook rental) etc is not very disruptive. It plays into the massive institutions that already exist.The toughest part about education is that, in the end, many people value it as a signaling factor rather than for its own sake (ie: go to an Ivy, get a college degree). And it is usually the signaling factor that people pay for and how they evaluate education.It would be great for someone to flip that.

      1. Pascal-Emmanuel Gobry


      2. ShanaC

        That’s easy, you buy the network in theory. Find new ways for young people to buy netorks, and they won’t go to college.

      3. Rocky Agrawal

        I was thinking about that the other day as I was going through some videos at Khan Academy. I wonder how employers would react if I added Khan Academy coursework to my resume.

        1. Douglas Crets

          I would really like to know this answer.I would also like to know if anyone knows of any companies that do blendedlearning as part of their training of employees. I am writing some researchon this issue. Any help would be great.

          1. Jared McKiernan

            I’d consider it a positive signal even to be aware of Khan Academy…but of course I’m a contrarian 🙂

        2. christmasgorilla

          I think this gets to the heart of a Paul Grahamism: “be so good they can’t deny you.”If you had a some way of having stellar students (a very difficult exam, lots of professional success, etc)–you can snowball.In fact, maybe I would say that ycombinator is the most disruptive thing in education today.

    4. riemannzeta

      Not an opportunity for investors.

  20. Pete

    The concept “contrarian investor” implies valuation, which shouldn’t matter to an early stage VC. There should be no difference between a $3M pre vs a $20M pre if the company will be worth $1B. USV should (continue to) pick great companies within great markets led by great entrepreneurs. If you do that, you’ll succeed, regardless of how hot the web services market is.Your LPs expect USV to invest in early stage web services, and find the winners. If you believe there is too much money going into the sector, and USV can’t outperform, then you have a major problem! Or maybe you need to redefine what “web services” means to USV.

  21. LECHSAM group

    Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well. – Warren BuffettBe fearful when others are greedy and greedy only when others are fearful. – Warren Buffett—There is tremendous upside when you take a well informed position that is not currently popular opinion.

  22. andyswan

    I’m a contrarian myself. The most common problem for contrarians is that we are almost always in too early….and the last leg of a momentum play is usually the sharpest. That can bring great pain in public markets with liquidity….but is almost a non-factor in private investing with no liquidity and an extended timeline.Everyone is hot on social and cloud-based platforms. One of the reasons I liked investing in backupify early was because I think there is big opportunity in those platforms crashing and burning. Still is. If Carbonite or EMC are smart, they’ll buy the company before the headlines hit….if they’re rich, they’ll wait until after ;)Ideas for contrarian on web right now:Caters to womenCharges users moneyCaters to the large group of people that would never consider buying an iPad. (Poor or unhip or ___)Alternate currency and payment systemsJournalism/Media content creation (Digg R.I.P.ed the aggregator play 2 weeks ago)Gambling technologies for currently “illegal” online games (they gotta tax it soon)Thinking of more….love the topic

    1. fredwilson

      I love these ideas and the thinking behind them

    2. ShanaC

      how about caters to businesses internally and not for marketing perspectives. We focus too much on consumer facing products

    3. Mark Essel

      Yeah man.There’s all kinds of markets getting ignored by the hip web hacker crowd.They might not be billion dollar market caps, but they’re real.

    4. leigh

      and since everything is moving to open networks why not try private/closed especially anything that gives users power over their own identifies across platforms.

      1. andyswan

        I agree. I’m definitely contrarian when it comes to the open movement.

      2. Tereza

        I’m doing that with mine. I’m saying — “Do you *really* trust Facebook? We’re here to help you be a little more discreet.”It may not appeal to everyone, but there are a whole lot of people who care about that.Especially those of us with pics of our kids which suddenly went public. Not cool.That would never have happened if Zuckerberg were a parent.

    5. Tereza

      My business is covering at least four of the six so if anyone here is interested drop me a line at @terezan and I’ll DM you wiring instructions.

    6. Toshi O.

      Does Free-mium count as charging money?

    7. Elie Seidman

      I like these a lot. In general, catering to older (35 to 75) not-hip users is something I’m very bullish on. I’m 36 and grew up with the internet but I’m not hip and going out and doing the things that the 20 something urbanites are doing. My parents are in their late 60s and are completely web savvy (had a Mac in 84) and are certainly not using the web for the things kids in their 20s are using the web for. This is an audience that is now basically completely online, web savvy enough, and has money to spend. Thinking about their needs is a critical orientation that more of us need to have. Whether it’s font sizes, nature of social lives, or whatever else.

  23. x3r

    There’s something heroic about contrarian investing that appeals to everyone. Your quote captures that well, although I prefer this one: Buy to the roar of cannon and sell to the sound of trumpets.However, claiming to be contrarian also has something of being a denizen of Lake Wobegon: Only a small minority can be contrarians, ere their action joins the mainstream. The contrarian position is not just the other side of consensus, nor is it a statement of what “should” be (which is the toughest part for idealists – green investing, anyone?). It represents the likely course of history after some unexpected (by most) discontinuity. So where’s that next unexpected disruption on the webs?

    1. LIAD

      is anyone planning for what happens if net neutrality hits the dust?

      1. ShanaC

        The contrarian bet is that it won’t. Verizon and AT&T are both in in arms race as supreme rulers versus wifi versus each other. Contrarian bet is that someone will have to give because no one position of anyone is dominant or will be in the US, so they will have to compete on price where the vast majority of consumers are (in cities) and work together where they are not (in the countryside)Contrarian bet- more devices will need to be manufactured with silent push notifications. Reverse HCI, your fridge needs to push things to the internet, but you don’t need to know.

  24. akharris

    The thing I’m not really sure about here, Fred, is whether you mean “contrarian” as a philosophy in and of itself or as a result of your belief in your own investing logic over that of market trends.Contrarianism as a pure investment thesis is basically just an argument for mean reversion. I don’t think that’s what Rothschild was saying (nor is it what Warren Buffet talks about when he discusses investing in hamburgers, or what John D. Rockefeller intended when he instructed his agents at Standard to always buy oil regardless of the how low the price fell). Rather, they’re saying to hold the position in which you believe, regardless of what the broader market is doing. That goes right back to the discussion in the comments yesterday about having your investment thesis/logic and using it consistently. You incorporate information, consider other arguments (like those of the market), but ultimately, you do what your method tells you. That’s the kind of “contrarian” I can get behind.

  25. Carl Rahn Griffith

    An increase in the VC community activity outside of the USA would be pretty contrarian…

    1. fredwilson

      we’ve made four investments in european startupsi really like that ideabut it is hard investing so far away from homei don’t think we are the ideal firm to lead this trend

      1. Pascal-Emmanuel Gobry

        Highly qualified seed investors in France are proliferating. Talk to the guys at Kima, ISAI, Jaina…A completely non-conflicted comment. 😉

        1. ShanaC


      2. Elie Seidman

        American entrepreneurs can and should be investing in targeting international audiences. We tend to be too US centric here with other markets something that will be done later. But like David Hasselhoff, there is nothing bad about being huge in Germany. It’s my take that in many cases, the US market is far more competitive than the markets abroad.

        1. Berislav Lopac

          But it’s of utter importance that other markets are just the US one, only smaller and with funny languages and currencies. Depending on the specific market, there are numerous details that can affect a startup’s success of failure. And it’s important to bear in mind that often thera are more differences in culture between two adjacent European countries than there is between California hippies and Alabama rednecks.

          1. Elie Seidman

            No doubt. Important but solvable complexities.

  26. Carl Rahn Griffith


  27. Mark Essel

    I’m looking at markets that are vastly ignored by most network intelligence apps today.What’s possible today or tomorrow that wasn’t conceivable just 4 years ago. Mobile apps and network routing intelligence can change how people find what they need nearby. Push notifications through mobile devices can drastically change how and when information finds me.Heck even job boards on hot sites like Stack Overflow and Hacker News feel outdated. What’s missing from today’s social search toolset that will help unemployed folks find fulfilling work rapidly (this hits close to home for me). What will help fresh businesses that are in strong growth find new capable team members that are the best cultural match to their mission? We can all come up with proposed solutions, but what’s the best fit to our current macro trends, new training?Data mining, data mining, data mining! Coordinating search through existing public information from the enormous amount of things connected to the internet. What are the highest value opportunities, which are the hardest problems that will yield the greatest social value.I could list many more opportunity areas, but the hardest part about any of these problems is finding teams with conviction that can out execute (hire, research, race) their peers.

  28. Toby Ruckert

    For me contrarian investment (among what was said before) also means”to invest in things which are commonly being claimed as “dead” or “failed” (maybe for long) but the next minute are used by the very same people who just complained about it.”Why?- a big frustration factor leaves room for improvement (opportunity)- “commonly” indicates a large number of people being affected (market)The downsides?- there are reasons why others didn’t get it right so far (so it’s better to know them)- something that’s not entirely new, may not be perceived as innovative (marketing is a challenge)One such thing that comes to mind has to be the topic of “email”. Basically the internets’ killer app and used by almost everybody and still not grown into what it could be (#email overload, #efail…)Complex problems often require simply looking answers that have a significant background complexity. So as a VC you may have to be prepared to be in it for the long term to reap the benefits…But then again, that can be both – good or bad 🙂

  29. Chris Clark

    The promise of so many web start-ups is that they can “capture x% of the $ybillion market for z” in no time flat if they get meaningful traction. There are, however, many services that can’t be delivered without lots of real, living, breathing people. Counseling, coaching, personal training, public relations, and customer service come to mind. But though those services don’t scale like many web applications, there is still plenty of room for innovation.Full disclosure: my parents founded a company on that very contrarian premise back during the boom of 2000 – – though the business model has evolved away from the pure web platform play that it began as. Right when Yahoo,, et al were booming, they asked themselves this exact same question and developed wellcoaches as a sort of “anti-dot-com”.

  30. kagilandam

    1) There is too much data and way too much garbage on the web. Cleaning the garbage and then refining the data would be the best bet on web. 2) No more professors inside a 4-walled class room.3) Serves the purpose health care systems….and not for utilization of 3TMRI, 64-slice CT and PET-CT.

  31. Rahul Deodhar

    Interesting – a move away from web infrastructure (even cloud) to platforms is contrarian. I no longer think women-related web investment is contrarian. Possibly I am cheering for Tereza too much.Today, we may consider moving away from platforms as a contrarian. Reverse search is something I am considering. Instead of me googling for products and prices can I simply state I want to buy a camera and all camera vendors can jostle with me for potential sale. May be it is more for B2B rather than B2C. (BTW B2C is wrong nomenclature, almost always C goes 2 B. Reverse search is opposite B goes 2 C.)

    1. Cindy Gallop

      Heh heh – Rahul, loved your women-related web investment comment!You might be interested in this interview with Paco Underhill:…where he says:’I think one of the ironies of our tech businesses is that so much of it doesn’t recognize that women have the power to take a technology and turn it into an appliance. It’s only when something has mass acceptance to females that it succeeds.’

      1. Rahul Deodhar

        “women have the power to take a technology and turn it into an appliance”This is fabulous! thanks for sharing. I think we are close to the point.

    2. Jared McKiernan

      Thought about something like this a while back- true opt-in advertising, where you state how long you’re interested in receiving pitches from vendors about their items which fit your criteria. Transparency would be key. Might only work for big-ticket items like cars?

      1. Gulp Media

        Might actually work for any digital content too…

      2. Rahul Deodhar

        Need a different sales infra for this. Interesting trigger

    3. Tereza

      I actually think that the VC sector may not have to contract by roughly half if they’d been investing in 100% of the population the whole time.There is talk about women’s businesses. Still not seeing quite enough dollars go in.Also I think there is great opportunity for recognition of supporters. I’d love to see us recognize an “Investment of the Month”, alongside naming a few “Up and Comers”.

      1. Rahul Deodhar

        BTW we definitely need lot more investment in women-oriented businesses – it is just not a contrarian point of view.We must see women entrepreneurs more than men in this space. (Just a thought may be I am wrong)

        1. Tereza

          An entrepreneur needs to be super-passionate about the business he or she is in.It’s the only way you can be thinking about it 24/7. If you’re not compelled to think about it 24/7, guaranteed there is a competitor that does. So find something else.As a result I find it completely natural and logical that women’s stuff is under-developed and as a result under-invested. There is both a demand and a supply problem (vis-a-vis the investment market, not the consumer market itself).But there are ways to address this to make some improvements.It’s funny, when I started my business I almost didn’t do it because I felt the barriers to entry were nil and that was a risk.Now I believe that given that women’s markets are “contrarian”, it in effect plays as a barrier for any of us in the competitive set. So as long as I can bust through, that’s actually a great position to be in.It’s just funny to me that the barrier is totally psychological.

  32. Farhan Lalji

    Personally, I’m betting on next generation display. Think there’s still a lot of room to innovate in advertising online and with all these free services they’re going to need advertising that goes beyond the commodities that all these targeting ad network companies have been focusing on (no offense).

    1. fredwilson

      but will it be display or something else?

      1. Farhan Lalji

        The product’s display in principle, but differs in pricing and execution.The thesis is that display advertising works for big companies with large inventories, but ad networks don’t serve smaller publishers well – so we’re working on fixing this, by connecting advertisers to smaller publishers who have communities/content that match with their goods and services.

        1. Toshi O.

          Saw someone doing something in interactive display off of twilio.User texts short messages to a number and watches a video interacting with the user based off what was texted.Think of it as subservient chicken via sms and think this would have mass appeal to advertisers to get the message off via sms – would be great for in store displays.

  33. Michael Langer

    Seems tough to invest when there is blood in the streets while only investing within your comfort zone. But being contrarian you should consider investing in promising companies that support and augment your current portfolio. This way if it is slightly outside your general criteria you can still justify it.

    1. fredwilson

      i was able to do that in the fall of 2008check out the link in the original post to the blog post about buying apple, amazon, and google when there was “blood in the streets”that’s what i am looking for. a bet i understand that is contrarian right now

      1. Henry Yates

        newspapers/magazines spring to mind. When I read this post I immediately thought of the guy Mark Suster blogged about a few months ago who buys “Dead Magazines”http://www.bothsidesoftheta…

        1. riemannzeta

          I agree on the media bets. Subscription-based models are going to make a comeback, and the media industry that looks dead right now will make a comeback. Group blogs formed by journalists who used to work for major media empires strike me as a great potential bet. Any group that has privileged access to offline information will be able to raise rents faster than inflation.

          1. Jared McKiernan

            I don’t think media is truly contrarian right now though- look at all the alternative business models being tried in the space- it’s clearly a hot area albeit one in which contraction is occurring.

  34. millarm

    Broadcast TVBecause it’s about to be killed by Internet on demand video and social networks.Only….It still commands huge viewing hours and is a mass medium.That’s where I’m putting my time and money!

    1. fredwilson

      we have one bet in that sector – dave morgan’s simulmediait is a contrarian bet and i think it will do very well for us

  35. Robert Verwaaijen

    Fred & Fred ;-)What are your views on augmented reality? I am biased – as an investor in a promising start up in the space, but interessted to hear your views. Maybe worth doing a blog post on?

    1. fredwilson

      i haven’t seen a compelling use of the technology yetit is amazing technology for sure

  36. Jeff Rosen

    Great post Fred.As a contrarian investor myself, I look for opportunities where irrational behavior has created a supply imbalance which has driven down the “market” price for an investment (i.e. equities) far below what I perceive is it’s fair value.If I try to parallel that philosophy into web investing I might make this analogy….there appears to be an “over-supply” of web start-ups that require less and less initial capital where you can make opportunistic (cheap) investments. So what does this mean? For the same amount of initial capital, you can make a broader and cheaper range of investments that should have a higher rate of return.I think NOW is that opportunity.

    1. fredwilson

      that’s not the bet i want to make

  37. roshandsilva

    Fred, it’s tough to think contrarian in times of great Exuberance. I invested some money during the boom time and the strategies that worked for me albeit with very little capital were:1. To keep track of multiples in the VC, PE, Pre-IPO and Public markets and to sometimes go across sectors depending on where I felt the multiple was most reasonable. It was surprising that sometimes there was good public companies where the management needed some encouragement and a little capital and time to get the business in tune with the times.2. Build companies from ground up instead of investing in a fully baked idea i.e. one with a team and market in place. You need to be fair and it may sometimes bring with it a lot of emotional pain but you could end up with a significant ownership position in a high quality business as long as you choose high quality people and play fair with them.3. Aggregate smaller pieces to build a bigger business. This involves making a larger capital commitment to an opportunity and identifying first a really high quality company that can form the foundation of this strategy. Usually a marked leader in a niche segment which has not been marketed effectively is a good starting point. The big bet is essentially taking the ‘good deal’ mainstream by making the transition from the early adopters to the vast majority through good marketing.However, what is also a good strategy is to remain engaged with companies, track their performance and eventually the deals will stop happening and expectations from management will reset to realistic levels. I would caution against waiting too long in some deals though – when a lo of capital chases gold, a lot of money gets spent building railroads and highways – without theses it may not be able to travel fast.

    1. fredwilson

      i also like the idea of doubling down on our good investments that are not as well known but are quietly killing it

      1. roshandsilva

        doubling down is a great strategy. However, there more then ever there is a need to be fair and spend time with management as sometimes if their sector is out of favor they may be asking themselves if they are on the right path. Having a supportive board member will make a big difference.

  38. Marc Brandsma

    as frequently stated here, given that half of the vc work is to help its portfolio companies grow beyond the raw infusion of cash, what is a contrarian hands-on VC?

    1. fredwilson

      i’m working on defining that right now Marc

  39. Guest

    Palm OS and Windows Phone 7 on the apps side of things. The early movers will gain a lot

  40. Jeff Rosen

    Sorry Fred.Just trying to put it into your own context. I recognize you are attempting to make very strategic, even tactical investments. I was simply trying to analogize “blood in the streets” and your own 2008 experience.

  41. Liam

    If early stage web startups were a contrarian sector 6 or 7 years ago, the Ries/Blank ‘lean startup’ has come into its own today. Going head to head with gatekeepers may prove to be a more expensive proposition that requires bigger bets. So that’s one (expensive) path to consider. Maybe unrealistic for all but the P/E (or public company) crowd.You are into public policy where it affects your world (startup visas, net neutrality, bailout bills, etc). Where are the entrepreneurs disrupting in that sector?

  42. Pascal-Emmanuel Gobry

    Here’s an investing thesis I’ve had for more than a year now and that’s somewhat contrarian. I call it women arbitrage.It’s not just that most VCs and entrepreneurs are men and so miss opportunities. It’s not just that women are a huge market. It’s that now they’ve become a critical mass online.Take the top three fastest growing (users and revenue) startups started in the past few years: Zynga, Gilt and Groupon. What do they have in common? Their most engaged users are women. Correct me if I’m wrong but I’ve read several times that the core FarmVille user is, to overgeneralize, the “bored housewife”, and it tracks with my personal experience: my wife played FarmVille for a long time. Not that she’s a housewife — or, hopefully, bored. ;)Gilt is a fashion site so that’s self-explanatory, and was even cofounded by two women. Groupon works in theory for every gender (indeed, I’m a happy customer), but it’s women who get addicted to it and, I would assume, drive most of the revenue by making regular instead of impulse purchases.We talk about “techies vs normals” and I think that’s a very important distinction, but when most techies say “techies vs normals” when they picture normals they still picture men. Women are the über-normals online.They’re extremely valuable to brand advertisers who will drive internet ad spend growth. Post-“hecession” the amount of disposable income they control will only keep growing. Fifteen years after the internet has become a consumer phenomenon, they’ve never been less afraid to spend online. And they’re underserved.Women arbitrage.Glam Media, Circle of Moms,… All these businesses are going gangbusters as far as I know and no one talks about them. I’m sure Arrington would have mocked you if you’d invested in something called’m not saying invest in women entrepreneurs as a form of affirmative action or promoting diversity. I’m not even saying invest in women entrepreneurs necessarily. I’m saying arbitrage this inefficiency in the market.PS I’m a Foursquare fan as you know but if I was someone advising them one of my chief concerns would be how they’ll fix their woman problem.PS2: http://www.businessinsider…. — glad I added to my fake VC portfolio. 😉

    1. ShanaC

      Pascal, how would you like it if I said I’m going to invest more in men’s deodorant in the US because it is a growing category, I suspect in 20 years from now men will wear makeup.(FYI, it’s true, men’s beauty products are a growth field, particularly with adolescent and young adult men, which is one of the reasons why Mustafa the OldSpice guy was soooo popular)I’m pretty certain men are pretty similar to women in a lot of ways (not all ways but a lot). These businesses weren’t tech as much “how do arbitrage time and luxury” which in the US has been a woman’s role for a long time (see, Betty Friedan, the Feminine Mystique). More men live on their own now, and are doing more typically “feminine” things. It’s going to be an interestingly gendered worldedit for the arbitrage, damn you spelling!

      1. Pascal-Emmanuel Gobry

        You may be quite right.

      2. Tereza

        Since you brought it up… are the fastest growing category in the personal care segment.One key area to note is male hair removal, otherwise known as “manscaping”.And it’s a lot more than shaving, it’s all methods (waxing, laser). It moves from OTC to physicians offices (and lead gen-type referrals).Big generational differences here.P&G has been placing huge bets in male hair removal.

        1. Pascal-Emmanuel Gobry

          Don’t let my wife see this.

          1. Tereza

            Is that because you’re old and hairy?Or young and hairless?No need to answer that, PEG.

        2. ShanaC

          Oh I know, but it still is a contrarian bet to say men are vain. As vain as women. It jiggers at our notion of masculine/feminine and it makes some people very unconfortable. Which is why I brought it up- sometimes it is good to invest where others are feeling the awkward

    2. Harry DeMott

      Love it.I have a long winded post up here today with some ideas, but one I left off, which really gets right to your woman theme is focusing tools and social networks around book clubs. I know so many “bored housewives” that read and discuss books – yet I’ve never seen any great tools for helping these clubs organize and foster discussion. Put it together with education. Wouldn’t it be great if you could log on – have book suggestions made, vote them up or down, link to amazon (or even better your local book store) to get the books, have discussion forums across book clubs – and ultimately put up commentary by professors on it.Hey that’s pretty good.Time to quit the hedge fund job and head into books!

      1. Pascal-Emmanuel Gobry

        Great idea. I almost started a company around the idea of a social, digital book club.

      2. Tereza

        it’s not about the books so much as being about getting together and the wine and talking about the personal topics that the books evoke.what’s said in the bookclub stays in the bookclub.naturally i’m making generalizations; some are much more serious.bookclubs are a great vehicle for connecting, venting, exploring…and then going back to your regular life.

    3. Tereza

      Being at home taking care of the kids can be a lonely place.Women’s need to connect with each other is very real. It cannot be ignored or suppressed.In her isolation, one friend of mine became addicted to online poker. Not the game so much as the connection with other characters playing.She snapped out of it one day when she handed her kids a bag of frozen peas for dinner…and realized it had gone too far.

    4. fredwilson

      etsy may be the most women oriented site i know of

      1. Pascal-Emmanuel Gobry

        That’s absolutely right — I hadn’t thought of that.More evidence for my women arbitrage thesis. :)PEG

  43. Steven Kane

    I agree in principle, and try to practice what I preachAnd I worship the Buffet-ism, “When others get scared I get greedy; when others get greedy I get scared.” And the Abbie Hoffmann-ism, “Sacred cows make the tastiest hamburger.”But I really dislike the term “contrarian”. And the philosophy.”Contrarian” infers that conventional wisdom is a relevant factor (that is, considered, and rejected.)If possible, I always prefer to simply disregard or ignore conventional wisdom, and make decisions based on whatever factors seem appropriateWhich means sometimes I go with the herd, sometimes I don’t.But in either case, the herd is not a consideration…

    1. fredwilson

      good advice

    2. willwhutson

      i think the hardest part of investing right now- is that there is NO conventional or prevailing wisdom.there 1000X ways more to invest today than we had in the 80’s, that’s wild and distracting.sometimes i think discipline is the only thing you need to be a contrarian.

  44. Jamie Lin

    Well, I just did the ultimate contrarian move — started a Y-C play in Taiwan ( where the market is supposedly too small and no VCs to take over follow-on rounds.As for contrarian ideas for US web, how about A) instead of more tools that create even more content, tools that can help find, filter and deliver relevant/personalized content, B) people will get tired of their friends’ updates and want to meet new people, and C) publishing popular web content as a magazine for those who don’t read online.

    1. Jeff Rosen

      I like that idea. I recently wrote about it. Here’s an excerpt..Funny that until now, no one thought to use that valuable Internet commodity “DATA” to connect people.Take a moment and think about how many “friends” you could effectively socialize with. You are dependent on your friends and friends of friends, an exponential factorial, but still limiting. Context works a little better, allowing us to find like minded individuals, but based on our limited online activities.Ahh, but DATA. We could choose as many or as few data-points as we wanted to find and connect with individuals. The same data that marketers and advertisers crave and buy.Let me put it another way. Imagine Google took all of the data they had on users and made it “anonymously public.” You could look up and connect with anyone in the world and in any language based upon your common “data-points.”This would remove, what I think, are the two barriers to current social networks; friends and context.Now you can explore AND discover, regardless of your number of friends or what you already read, watch or listen to.

    2. willwhutson

      i think actionable content is the real key here.most businesses don’t know how to engage consumers online – STILL.couple in engaging them in the social space and you’ve got a disaster.content still needs to be created, it just has to be easier to engage.find/filter/deliver is a space that is big, but dominated by some really large and strategically minded players. you better have an amazing product or relationship to win there.

  45. Vin Tang

    Hi Fred – I came across a very interesting post by Matt Mireles called “Bus in the hackers: NYC Startup Weekend” and noticed your comment. It sounds like you’re working on a similar idea. I am currently with Hale Capital Partners, an investment fund focused on technology companies, and am also a graduate of Carnegie Mellon.I’d love to know how I can help.Vin

  46. Justin

    Contrarian investing is an overly vague term to me. Buying something just because others aren’t isn’t a good model, but if it means buying things that are mis-priced because others are ignoring it, then I completely agree. I know this post meant the latter, but many people in my experience, misunderstand the term and buy into secular industry declines, bankruptcy stocks, etc.I’m a big fan of keeping it simple: The key to any company’s success is the creation of value. Period. The key for any investor is identifying a mis-priced asset – either it’s going to grow faster than the market expects or it’s assets are under-appreciated by the market – that has a catalyst to become properly priced. Period. If you invest in companies that are creating value and are mis-priced by the market with a good catalyst, you will make money no matter what the overall market conditions.What I don’t understand is this model in terms of venture capital. I assume risk-adjusted returns are the big calculation to make, but how do you quantify risk so early in a company’s life? Most of the time, it seems like these companies have acquisition or IPO exit strategies, which involve a lot of uncertainty. Perhaps it’s diversification that you rely on the most in VC – one big win to cover many small losses – but that seems like a big gamble. Maybe you could do a post on how you determine and mitigate risk in a VC portfolio in the future, or is that too niche of a topic? I think it would be very interesting to know…

    1. Harry DeMott

      I love the question on managing risk in a VC portfolio.There are any number of risks hidden in there, from the obvious correlation with the public markets, to the non-obvious correlations among investments, to the issues with the investor base – and liquidity risks that come up from time to time, as we have recently seen. then you have the risks endemic to the companies themselves: is the product good?, is the team right?, will they execute?, will others execute better?, are there larger companies coming into the space? etc..I’ve always thought that VC’s should probably get paid for the alpha they create in investing: i.e. picking the right teams, the right products, and nurturing them to a size where they can be sold or IPO’s thus realizing the potential of the investment.The beta portion – having the NASDAQ go straight up (or straight down) and succeeding or failing based on that is not a great reason to give a manager money.Best way to hedge – would be to be able to buy puts on the appropriate technology index with some for of money. If the markets crash and your IPO window is gone – and your strategic buyers are suffering from a very low PE or have no cash – you will make $ on the put bet – while losing on the VC side. If I were an investor in a VC fund, this is exactly what I would do. A successful VC will more than make up for the drag of the insurance.

    2. Dan Sweet

      “The key to any company’s success is the creation of value.” Creating value is merely the key to getting funded.Capturing the value you have created is the key to generating actual profits. Of course with an acquisition it is often possible to find someone willing to pay you for the privilege of taking on the second half of that challenge themselves.

  47. Harry DeMott

    Fred:You almost sound like a frustrated mutual fund manager here.You know the speech:”My investors have made the allocation into large cap growth, and holding cash is just not an option- so I need to invest. Now my universe is these 50 large cap growth stocks – so I have to figure out which of them to invest in – and lose as little money as possible while I wait for the world to come back around to my way of thinking.”Not a great place to be.Being a contrarian simply means that you want to invest in areas where others are not already invested – or in the public markets – perhaps shorting the securities that are the toast of the town.In your case that meant early stage web investments that focused on large networks of engaged users. And yes back in 2003/4 you and your partners were true contrarians.What has made these investments highly successful you is the more important part of being a contrarian – which is the ability for the investor to potentially be wrong and alone. Because you go into things that others wouldn’t see or didn’t see – you were able to secure good deals at good prices (something which is in short supply these days). Doing this and being right is the ticket to great returns. Of course, doing it and being wrong means total ruin. As the saying goes, you can’t go wrong buying IBM.So what are you to do now – as a contrarian.Well first of all, I think you should take advantage of the fact that you were right in the early fund. You now see better deal flow (I assume) than most of the other VC firms – and while pricing has gotten out of whack – you do have an advantaged earned by your early investments in this fund. So the first step would be to try and pick more winners in your position as a market leader. One of Buffets greatest strengths is that people want to sell to him – and do so at sub-optimal prices. I believe that USV is probably in that position to some degree in that great founders want you as a partner.Secondly, if you really believe that there is a dearth of investments in your space – and your contrarian nature tells you we are reaching some sort of bubble in your area of expertise, I would do 3 things:1. I would sell down stakes in my winners in a bunch of investments. I would get back my initial investments in the company and retain a meaningful stake to ride on the upside if the companies continue to perform.2. I would figure out how much reserve cash I needed for the existing investments – and would then see about potentially releasing incremental commitments from LP’s. They are so overweight private structures these days that you will win yourself huge gratitude from investors by freeing up badly needed cash – and going one better and returning cash from the secondary sales.3. With the return of cash and the release of commitments, I would tell your investor base that it seems wrong to tie up capital without a ton of great investing opportunities – but that you and the team were constantly looking at contrarian investments – and would certainly be back when you found them.So where are these contrarian investments – given your constraints? Here’s a list in no particular order:1. I like the education theme. Khan Academy is an unbelievable resource – but like Craigslist, it is not a real business – and can be duplicated. There’s plenty of opportunity out there in education (more lower school to middle school I think than college but also in post graduate/retraining) We’re in a real jobs depression, retraining workers in areas where there is demand could be useful. It is scalable – and fits your world pretty well.2. Just taking what you have and looking to replicate it in other countries could be a theme in and of itself. Look to places that will skip a generation of the web – never knowing IM, but going straight to Twitter – just as people in India basically skipped the land line and went straight to cell phones.3. I know you don’t do public in the fund – or at least I don’t think so – but public tech has been bombed out at this point by equity withdrawals. Taking your web services theme and tying up companies with your existing portfolio – and taking a position in some of these public companies might make sense – and you might even be able to raise a separate fund for this with that express purpose. It is hard, as an investor, to put out money into private start-ups with all the risks in the world, when you can buy tech giants like Google and Microsoft at < 7X EBITDA – when they have billions on the balance sheet. Not very exciting at the mega cap level – but better on the small cap level – where valuations can be even cheaper.4. Custom design and manufacturing. I’ve started to see a few companies out there that use technology to disrupt design and manufacturing. People will continue to decorate homes, buy rugs, beds, etc… Right now that industry is closed and difficult to get at – if people could solve those problems and bring mass customization (higher end ETSY – but customer driven) it might be pretty powerful. virtual design and general contracting.5. Lots of focus on questions these days. Why not real time questions? Is there a line at Shake Shack right now? How long? Can you send me a picture? This is probably out there and I’m just out of the loop.6. I still believe there is an enormous opportunity in the travel industry. I love to travel, and I love to research travel – yet there’s no one site that really does it for me. I think this is really the promise of the flipboard project that Mike McCue is doing in Palo Alto – taking different pieces of info and bringing them together in a way that a consumer can really understand. There’s a monster opportunity in consumer interfaces that is still not being met. As much as I like Foursquare – or twitter – or yelp – or facebook – none of these interfaces on their own are great for me as a consumer – and none aggregate everything.7. I call this one Mayor For a Day. Make local government fun. Have towns sign up and put all of the docs online – budgets – costs – revenue – taxes etc… and crowd source the local debate in towns. Make it like a game – where people who spend the most time and whose efforts are judged the best end up as “mayor” for a day – and then let the game intrude back into real life – by having the local politicians enact some of these plans.I have more, but I think that this is now too long probably.Finally, I would remember what my investing edge is – and seek to capitalize on that. In public markets – having a longer than a quarter time horizon is an enormous advantage, as Warren Buffet has so consistently demonstrated. In the PE world, everyone has a 10 year fund, so size can become an advantage. In VC land – size is becoming less of an issue, as evidenced by all of the angel posts of late, and everyone has a 10 year fund, so reputation and Rolodex become paramount – as do focus, determination (sticking by investment ideas), and an ability to be both intellectually curious and flexible. The nature of the VC world is such that what worked yesterday is likely to get disrupted today from a technological standpoint – and yet the basic tenets of business tend to carry on.

    1. fredwilson

      we should get together for breakfast or lunch harrywe are doing a lot of what you suggest in this commenti want to run all of this by you but i can’t do that in a public setting

      1. Harry DeMott

        Tell me [email protected] AT rivaridgeventures . comI’m done traveling for a little while – so around and always hungry.

        1. Tereza

          Hey Harry if there’s a Friday when you’re working from home let’s catch up for brekkie or lunch at Blind Charlies

          1. Harry DeMott

            It may be this Friday – I’ll know tomorrow. I’ll send you an e-mail once I know. Love ot head to Blind Charlies. Are you mayor there? I’m taking over New Canaan – but it is not much of an effort – not a lot of check-in’s. I’m looking for where David Pakman checks in up in Pound Ridge – I not sure he gets out enough up here!

    2. Elie Seidman

      Harry – a very interesting read. I’m a passionate contrarian as well and passionate about the Travel sector as well. is the manifestation of that. I’d love to chat with you – if for no other reason than to get smarter. I’m in NYC and it would be great to connect.

      1. Harry DeMott

        Elie – happy to connect.Send me an e-mail at [email protected] we can connect

      2. Harry DeMott

        BTW: And anyone can answer this – when I see people giving out e-mail addresses on the blogs they tend to write them asharry AT rivaridgeventures . comwithout the @ sign.Is this because the spam bots are going to crawl this blog – and now that I put an actual e-mail address out there I am totally in trouble as people start spamming me?

        1. Elie Seidman

          It’s an anti-spam effort. Not sure if it’s rooted in sound logic or not.

  48. ttunguz

    I ran an analysis of VC investing correlation to the S&P 500 a few weeks back (http://expostfacto.posterou… . In short, VC investments are highly correlated to the public markets.To answer your question, if you wanted to place a bet that were contrarian to the financial behavior of the industry, then you should look for capital intensive deals. After all, the median investment amount for VCs has plummeted. This would align closely with a contrarian bet either in semis or networking infrastructure in other sectors.As for the web, you would need to look for companies requiring significant sales forces which could include e-commerce suites, analytics tools and the like which both have enterprise sales cycles of 6 months or more. Alternatively, services leveraging large amounts of labor whose predecessors include Mechanical Turk, Task Rabbit, LiveOps and others might be another angle.

  49. petewarden

    I think the ripest areas for contrarian investment are those that ‘everybody knows’ have been tried and failed. Off the top of my head, building a search engine to compete directly with Google, creating Yet Another social network, or YA auction site, or YA classified service. All of these are definitely dumb ideas, but they cast a shadow over whole areas and anything that looks similar if you squint gets dismissed out-of-hand. I’d imagine Etsy had a hard time overcoming that perception for example.The conventional wisdom marks whole swathes of the web industry as dead zones for innovation. That’s based on very good reasons, but I’m convinced it leads to people ignoring good opportunities along with the bad ideas.

    1. Tereza

      If other people are yawning or groaning — jump in!

  50. ian_peterscampbell

    I don’t know how contrarian it is, but lately I’ve been thinking about “unhip” markets. I think that up till recently people have been focusing on the Young and the Cool for two reasons. The first reason (the snarky one) a lot company founders (and investors) like to think of themselves as young and cool, or at least relevant to people who are young and cool. So they go after the teenager and urban-20-something markets. The second reason, practical up till now, is that those are the groups of people who can be counted on to pick up and use new technology. In 2000 the web was still young, and a lot of 35 year olds weren’t very familiar with it or comfortable picking up new tools. Now though, in 2010, those 35-year-olds are 45 and have 10 more years of experience. More importantly, those hip 25-year-olds from 2000 are now 35, have markedly different needs than they did 10 years ago, and are very comfortable with adopting new tech. They aren’t as sexy as they used to be, but they’re a lot more wealthy, and comfortable with the idea of spending money on the right technical solutions.I think there’s a real opportunity for “High Utility Low Cool” services targeting the 30-40 somethings. Families, stay-at-home moms, mid-career professionals, older singles…life gets complicated as you get older, and there is a lot that technology could do to help if it wasn’t so focused on taking care of the (much cooler, but perhaps less pressing) needs of the hipsters.

    1. niallsmart

      Having spent the past week on vacation with my Dad and watching him struggling with Facebook, I wonder how much utility there is in customizing the platforms built by and for the 20/30-somethings for older generations. For example – simplified interfaces to Facebook/Twitter (built using their APIs) for people who don’t want/understand all the featureset or UI cruft.

      1. Tereza

        I’d like to see more Wizards that help people easily set up customization that’s customer-needs-driven and not product-definintion driven.In fact the onus should not be on the customer to understand the detail of your product, but on the product to understand the needs of the customer/user.Too often products force the user to user the product’s vocabulary, and not the person’s own. it would be opposite.The user is the expert, above all, in his or her own needs. The product should guide the user through getting his or her needs met, as effortlessly as possible.

        1. niallsmart

          Tereza – I agree with all this. However (based on 1st hand experience) Ifeel an /entirely/ different approach to UI and featureset may be justifiedfor a segment of Facebook’s 500MM population. It’s a pity they killedFacebook Lite.

    2. Mark Essel

      Couldn’t agree more Ian, great examples.I don’t need to keep track of bars I checked in at last night, I need to know I can pay my mortgage 3 months from now.

      1. Tereza

        Your long-term loyalty to the service you describe will probably be a lot stronger than checking into bars.

      2. fredwilson

        you might need to do both

    3. Tereza

      I’ve got a bug up my *ss about a seriously robust but simple family calendar sharing utility.I wasted all Sunday keying in multiple physical calendars and then importing them into Google Calendar for full-family visibility and access.As I anticipated, lo and behold, there is a 2-year-old unsolved “known issue” prevents me from finishing what I sent out to do and now I’m questioning the integrity of the data in said calendar. It migrated sone data but not all and give no way of knowing how to check which data came over, nor a better or workaround way of making it work. I’m so pissed at GOOG right now. They don’t care about my needs. I want my weekend back.My life is not an edge case!!!Slightly ahead of the curve, possibly. But not an edge case.We are a family with two working parents (more than half of families are), we have a caregiver who needs to see our schedules, and two kids who go to two different schools and do totally different activities. My husband and I come to this exercise with calendars with lots of history and repeat events. BFD. There are much more complicated families than ours. This should not require a retrofitted solution and in fact my semi-educated nanny and Luddite mother-in-law need to be able to figure it out easily, too.I cannot risk 3.5-year-old sitting alone waiting for pickup based on a randomly dropped calendar entry. Unacceptable.What are they thinking?

      1. Ian Peters-Campbell

        Totally agree. A dead-simple, multi-user calendar system that I could use collaboratively with my wife, babysitter, and visiting family members would be sweet, if it had both web and mobile front-ends. Not “cool” at all, but it would be valuable to a whole lot of grownups.

        1. Dan Sweet

          the child sports scheduling application is huge too. the all-volunteer coaches that are up late regularly working over paper based phone trees with last minute changes would benefit hugely.

          1. Tereza

            I’ve heard good things about looks deceivingly simple on the front end which belies much more complex stuff happening behind the scenes.The people who worked on it worked very hard and with a whole bunch of users to give it a distinct “we’re not a fancy tech tool, we just give you what you need ” kind of feel.It takes a lot of work to achieve that.

      2. Harry DeMott

        Tereza: As a power user of Google Calendar for my family – we have 6 separate color coded entries open on all of our computers at pretty much all of the time – I’m a little worried about what the glitch is. Am I going to lose all of my stuff?

        1. Tereza

          I’m sure you’re fine. What you have sounds like what I’m trying to do.I entered it all into iCal because I want that as the client — I like it best as my access point on the go.The import to Google worked for 5 of my (simpler) calendars. But my own pre-existing work calendar does not execute, come hell or high water.This is a data set that has gone from paper to Palm to Lotus Notes and Blackberry back to Palm then to Outlook to iPhone Entourage to iCal. I guess this is evidence of growing old.Every time I make a switch I’m told “it’ll be simple!!” but then I lose 1-2 or as much as a week (cumulatively) scrubbing through because some fields or functions in fact do not transfer cleanly.So what I get is, “Only 619 of 2013 records were transferred”. The interesting thing is, each time I try, I get a slightly different count of how much was transferred and how many records. Weird. I am a bit fearful that the fix involves deleting past events. I need the historical calendar for reference.Harry if you’re already in the system and functional, I’m sure you are fine. I don’t have any evidence to suggest they may spontaneously drop events if you’re already fully loaded and active in there. It’s about the import.

      3. ShanaC

        Look at the Gotham Gal- a CRM for a family??? (how was that resolved)Honestly, with something like that you could graduate into it.

        1. Tereza

          Not sure where they landed and I agree that’s a need too.But to me the CRM is a 1-2x/year for holiday cards, and then on-the-go access for key numbers…though the latter is not so much of a pain point for me.The calendar thing — how we spend our time and coordinate amongst ourselves is a day-in, day-out conversation and unfortunately frequently generates frustration. It’s one of the scarcest resources we have, is it not?To me it is the cornerstone of everything.

    4. ShanaC

      To be honest- the young cool crowd goes through the same thing, they just are afraid to be uncool and say, “I have no idea what I am doing” and therefore end up having early mistakes in life about these issues….Most adult products do well with kids….

    5. fredwilson

      this is the big theme of this comment threadi have made note of itthank you so much

  51. ShanaC

    The most contrarian thing right now I can think of is technical manufacturing. Not cars though. Let’s do something more extreme where the internet will have to play a role.That and I think darknets are contrarian. I think we all talk about sharing. Not everyone can or should or does. Creating comfort zones for those people os criticial- means expanding information while closing off access points of those who wouldn’t use this stuff otherwise

  52. J. Anthony Miguez

    Your line, “But we are not paid to sit on the sidelines. We are expected to invest capital.” Highlights one of the biggest problems for many VC’s and now Super-Angels with committed funds. You are pre-disposed to do deals when sometimes sitting out (for a while until a new thesis can be developed) may be the best strategy. i think that some of the current deal inflation we are seeing is due to the closing of some VC’s investment periods and therefore it is better to do an “OK” deal than none at all (they don’t get paid for that). There was a book written over a decade ago called “The Second Wave” that highlighted that jumping to the next upswing (which may initially look lower than the wave you are leaving) is a success generating move for company strategies and investors. Again you demonstrate why you are a leader by asking “what’s next” when many others are still chasing “what’s left” of this wave. Thank you for the thought provoking post.

  53. Russ Dollinger

    You know your space well. You think it might be prudent to pause in that space. You have to keep making money for your LPs.But, you don’t want to invest in a space you don’t know well.Solution: Allocate a small amount each year in out-of-your-space companies that allow you to learn new spaces. As you learn the new space you will be able to recognize and take advantage of new oppotunities.

  54. Harry DeMott

    Let’s get back to the lean versus fat start-up debate!Consumer facing web services have gotten leaner and leaner – to the point where angels can and do finance fund many companies to consumer acceptance (or not).A true contrarian would look at his own blog history – and his own speeches and debates in public – and then go the other way.What if there were companies and services that could lock in a market – but required $5M in start-up capital – growing to $30M over time to build and secure their competitive advantage.Those companies are not exactly in vogue – but where you are building up large proprietary data sets or processes – perhaps the investment upfront is worth the outcome.If I had a very large fund and was facing your dilemma – this is where I would start looking.

    1. Douglas Crets

      What about investing in a business that brings quality control standards todeveloping countries? I got this idea after reading this blog post: The Busto Nowherehttp://languagelog.ldc.upen…

  55. Erin Lawlor

    It seems to me that if you want to be the investor you most admire, the contrarian, you must not only be contrarian against the external establishment, but also your own internal establishment.Like it or not, given your statements, you appear to be a conventional as well as a momentum investor.”We will only invest in things we know well so that takes non-web sectors off the table. Add to that our particular investment thesis around investing in large networks of engaged users and avoiding gatekeepers and you have a quandry.”If you want to reap the rewards of being different – you must really be different.

  56. knowledgenotebook

    Does that black sheep have more wool (more value)? 🙂

  57. sbmiller5

    I first learned about Contrarian investing during an internship at a small financial advisor who actually did the investing for his clients – he dropped a cover of the economist on my desk with a bear and said “Time to buy.”It’s a lesson that’s served me very well over the years – but it can be easy to get caught up in the momentum and lose sight of contrarian thinking.

  58. paramendra

    You must be doing something right. You got a great track record. I mean, to get into the ground levels of Zynga, Twitter, FourSquare. That’s a killing.

    1. ian_peterscampbell

      It is, but they’re all very similar companies in a way, right? Every one of them is a socially viral, network-based provider of mobile+web-based services. That space has been so successful up till now that I would imagine from an investor perspective it’s getting pretty saturated. It’s probably getting a lot tougher to find deals, and when you do find them they’re probably coming in at much higher prices since everyone wants to get in on the act.So the trick is to find the next market that’s going to be like that, and get there before it heats up 😉

      1. paramendra

        My message to Fred: FoodSpotting is the next FourSquare.

  59. Dexter819

    Great investors often make contrarian bets during controversial times (the more controversial, the greater the return subsequently when it is right), but being contrarian does not guarantee making great investments. Being contrarian doesn’t make you look cool or hot in cocktail parties. Being contrarian is against human’s animal instincts that make our societies work. Being contrarian would sometimes expose you to more than your fair share of criticism and second-guessing from your funding sources, your friends, your family (Gotham Gal included) and even… your blog readers! And worst of all, when you get wealthier by being more contrarian, most people would think you might have had insider information or done some kind of manipulation to get your edge. People might overweight on jealousy and envy and underweight respect for rational guts (kind of oxymoron term). Could you stay on the sidelines and lose half of money from clients for not acting? Or rather lose half the money from over-committing? You mentioned before being contrarian sometimes means going against or doing something earlier. I have one more suggestion. In this world where web startups are affecting not only their local national crowd, maybe your firm can look for potential candidates elsewhere. But then again, VC is not Buffett-style investing. Can’t just read annual reports, do some calculations and invest!

  60. Tom Hughes

    The most extreme contrarian investment I can imagine right now is US-based manufacturing, and while I realize that USV is not going to contribute capital towards widget factories directly, there may be a disruptive web play in optimizing the use of surplus manufacturing capacity. Where is the company that is matching idle assembly lines with purchasing agents considering placing orders in Shenzhen? The corporate culture of manufacturing retains a pre-Web culture and structure where the working assumption is that all you can buy online are “finished goods.” Meanwhile, the “unfinished goods” (specs and designs and requirements) are being faxed halfway around the world.

    1. Douglas Crets

      I think there is something like this in China with a company / projectcalled J.U.C.C.C.E. It was started by a female MIT grad, and it is based onmanufacturing for the “green” sector. They use a web interface like anAlibaba or eBay to hook up manufacturers with companies that need greentechnologies, or with funds that will pay for the start up of such, etc.Peggy Liu is her name. I interviewed her a few years ago for Audreymagazine.

      1. Tom Hughes

        Thank you for this. I wouldn’t be surprised to learn that China is more flexible in this way than US and European markets. The “contrarian” approach, though, would be to invest in the competing (i.e., developed) markets, taking the opposite side to the conventional wisdom that China is the “workshop to the world.”

        1. Dan Sweet

          the old story was that labor costs were more variable in emerging markets like China as workers had less rights and benefits. now with 17% unemployment maybe some Americans would be up for working with a few less guarantees?

  61. joeagliozzo

    (taking a deep breath here, anticipating massive rejection) – but – how about “lifestyle businesses”. That’s the real contrarian theme to VC investment.Conventional thinking is the business must be “scalable” to be suitable for “VC investment”, so only “scalable” businesses and business plans get funded.However, there are a literal “ton” of great businesses that could grow to $10M a year in revenue or more and provide great livings and a ton of jobs, all of which are great for the economy (both US and World).The problem has always been – how does the investor get their return. Maybe what we really need is innovation in structuring these investments.Does it start with high risk (angel) equity and a standard deal wherein the angel gets dividends until a stated return is reached.There are plenty of businesses that can reach scale quickly enough to pay a dividend and return capital to provide an early investor 20%+ IRR’s.I think it could be done and maybe a syndicate of angel investors would reduce risk and “formalize” the process. You could limit to web/net companies that can use all the “modern” techniques to reduce risk – lean startup, customer development, early search for a business model before much cash was injected, cost effective SEO techniques for early customer acquisition, etc.Sure you never get a 1 out of 10 investment that does 10X or 100X (but you never know). The flip side is probably 80% of your investments could grow into sustainable companies that pay you a 20%+ IRR and create a ton of jobs and relatively wealthy business owners (who of course want to invest in the next syndicate and pass along the knowledge!).80% success x 20% IRR = 16% IRR overall.. if you get 25%, that’s 20%+ IRR – the target for most VC funds.

  62. Elie Seidman

    I think that the contrarian viewpoint today is to invest in “fat” vs “lean”. That does not mean companies that are wasteful with money (as many fat companies can become) but rather companies where complexity of product and capital required to build is significant. The challenge with companies that can be built with a few million dollars is that they can be built – by any good management team – with a few million dollars. With the proliferation of small funds, getting a few million dollars has – seemingly – become far easier than it was 6+ years ago. As a result we’ve ended with lots of companies that are really features and that can, in many cases, be relatively easily replicated (low barriers to entry). But most companies – even ones that will produce great returns – are not Twitter or Foursquare where the power at work is less about capital and product complexity and more about network effect. Those business, instead, require a meaningful investment of capital over a long period of time in order to build a large business. There are many compelling business opportunities online – typically in markets with a large established player or three – where the activation energy to get over the inertial hump is very large. But said established players are – beneath the surface – often slow and uncompetitive. Their strength comes from their size and established position in the market – not from talent. In those opportunities, if you get over the significant inertial hump, there is a huge market to be had (far larger than in 04 because of the massive growth of the internet to a true mainstream market).My instinct is that we are seeing a polarization in the investment community and an opening in the marketplace as a result: Series B players who would prefer to take less risk and invest at higher prices in more mature companies and Series A investors who are trend/fad driven investing a few million dollars. While a subset of companies can thrive in that environment, many good ideas that require 10 to 30 million to reduce the risk profile to the point where a “late stage” investor will come in will likely have a harder time given the current investment model.Given your track record, you could easily raise a very large fund and use that fund to make bigger investments. The market space you occupied with the 03 fund has a lot of competition these days and the middle of the market is losing players.Examples of companies that took a lot of capital to become what they are – Trulia, Zillow, Yelp, Tesla (extreme example and not web), and OpenTable.

    1. fredwilson

      we are not going to raise a big fundi just won’t do itbut the past four investments we’ve made have been very old school traditional “series A” investments where we wrote checks of between $2.5mm and $5mm in rounds between $3mm and $6mmback to the future

      1. Elie Seidman

        Not surprised on either front. Building something that’s hard and expensive to build can be an important barrier to entry. As my co-founder Ariel says “there is an infinite demand for get rich quick schemes”.Working hard and smart for a long time on big complicated things that take a long time make work (Netflix, OpenTable, Sonos, ITA, etc) has become, at least in the startup media, out of vogue and less glamorous. The problem for the media is that the likes of NetFlix don’t generate a lot of news to talk about. They do the same thing again and again for years and year and get better and better at it. But with each new small company that launches there is a new piece of news that can be written about it. It skews the news – and therefore the popular perception – disproportionately to the news generating people vs the long haul people and in the process glamorizes the fast and cheap. But startups can be better at creating complex things – not just features. They can create cars, reservation systems, new drugs, etc. and they can do it more rapidly and cost effectively than very large companies so long as the capital is available to do so. I believe we need more startups with significant patience and resources instead of just more startups. I hope we see more capital available for startups doing large scale complex project; bringing lean/startup ethos to big projects.The pendulum always swings too far in reaction to anything that seems like it could be indicative of a sea change. There is some success with a particular model, people start to pattern match and the example becomes the rule. But the example was never indicative of a rule in the first place – it was just a point example.

  63. johndodds

    Life simplification products that harness the data management potential of the web for the mass of people who can’t or don’t want to do it for themself.

  64. Andrew G.

    A few thoughts:1) a contrarian must have cash to put to work at times when cash is hard for others to come by, therefore cash (or instant access to cash AT ALL TIMES) is your most valuable asset and should be your default when there is little to invest in, even if sitting on the sidelines is the most crowed trade (as it is today)2) contrarian for the sake of being contrarian is not a strategy, it is idiocy: much of the time the consensus is right, but consensus tends to break down beyond 2 or 3 years;3) sometimes, you have to let markets come to you and not force things: in this volatile world, with really bad leadership (right and left) in most countries, opportunities are going to present themselves as crises occur, just be patient and don’t suffer losses, certainly not permanent losses of capital4) a great idea in the hands of good management/entrepreneurs is not nearly as exciting as an average idea in the hands of GREAT management/entrepreneurs and I believe USV’s success has been about picking the right jockey, not just the right horse — it’s what makes USV so good at what it does5) as for potential “game changers” I would hope that by 2020 our country has a voting system which allows everyone to vote via the web from their home in all elections in every state — think of what that would do for primaries (when was the last time you voted in a a primary?), eliminating the extremism and promoting more centrist candidates who might be able to solve our numerous and serious long term problems … so the web and USV investors can together end what our founding fathers called the tyranny of the minority!

  65. Florian Feder

    The easiest contrarian investments right now would be the housing market, consumer finance and newspaper publishing. You could invest in web applications that operate in these fields. The added bonus could be that these industries are changing their business practices in order to take advantage of the web (think Zillow, BankSimple, iPad), so web related businesses could turn around even faster than more general investments in these areas.

  66. riemannzeta

    Go later stage, settle for smaller (mezzanine-like) returns, and/or roll-up the best teams through mergers while waiting for the IPO market to reemerge.Don’t try to compete with the angel funds — the only reason USV has been able to as well as it has so far is because of its geographical and brand differentiation.By analogy to the airline industry, we’re past the boom stage. Most investors lost their shirts once the technology had begun to mature and well-managed companies took over the most obvious niches. Only the few that were able to extremize the key variables beyond what others thought possible (the Southwests and Virgins) have been able to produce returns for their investors that were worth writing home about.

  67. riemannzeta

    On the Rothschild quote — I prefer Templeton’s, which (to paraphrase) goes like this: “I helped people. When people were desperate to sell, I bought. When people were desperate to buy, I sold.”

  68. Gulp Media

    I’ve been enjoying this conversation all day long. Amazing how many different interpretations of “contrarian” there are (and funny how Disqus highlights a spelling error for the term).Here’s my idea of a contrarian venture…Take on Google, Facebook, iTunes & Twitter all at once, with a completely different monetization model.Any takers?

  69. Latest Tech Updates >>

    Fred is my main man. I look forward to picking his brain 🙂 I have been following him for some time now and he seems to be a pretty clever guy. And his haircut is fine 🙂

  70. sachmo

    Hey Fred, my suggestion is to look into the open source hardware space. It’s a rapidly growing industry with a number of the same agile software principles that traditional web startups have. A lot of open source hardware links up to the internet of things (but a lot doesn’t as well)…I know you guys have invested in Bug Labs which seems to be doing well, but there are a lot of very interesting and creative opportunities out there.I don’t know that you’d find the next Twitter but I think smaller investments, smaller returns, and perhaps similar yields on the investments might be expected.Sparkfun is the classic open source hardware success story. DIY Drones, Adafruit, Solarbotics are just a few others to name a few.

  71. Alan Colmenares

    As Buffet would say, invest in markets with moats: Example: Latin America’s 170 million Internet users

  72. dlifson

    1. Brick and mortar businesses still don’t have efficient ways to market to the people who buy from them. Enormous amounts of money are spent getting people in the door, but businesses don’t know what worked and who showed up. Foursquare is in the right direction, but tying digital identity to purchase data is a very difficult problem that has been extremely lucrative for Amazon and other e-commerce players. Will Facebook launch a credit card? Can someone integrate identity with Point of Sale devices?2. Product search for items with short shelf life and high variability is also a truly difficult problem. Amazon’s algorithms fail because there isn’t enough purchase data to generate valuable item correlations. By the time there is enough data, the product has gone out of style. Sparse purchase data (due to scarcity) makes this problem worse. Etsy feels this problem acutely.3. Healthcare is an obvious problem that nobody wants to tackle. The patient who receives the services doesn’t pay for the services rendered, which eliminates market pressures to keep costs down. Instead, we get ballooning health care prices. Can a new kind of healthcare exist? Jay Parkinson of Hello Health here in NYC has thought a lot about that, would be a good person to talk to.

    1. John

      Hello Health is definitely an interesting play in the healthcare space. I’m just not sure yet how they’ll be able to scale their business.

  73. Sbijlstra

    After reading all those interesting lines of thought, I had to add some of my own (and support some previously mentioned)1) Quantified self (as used by Kevin Kelly) I expect to take up soon; Startups that take the Quantfied Self theme and wrap it up into a good web app are well. The movement starters are those that can do it by themselves in excel sheets.. I’d need more autonomous help from my devices…2) Open Source Hardware and the whole DIY are slowly steadily picking up but lack an ecosystem. Any players that facilitate it well or offer a whole platform online have a good outlook I’d think3) Internet of things is supposedly coming up but I’ve yet to find the stickers that let me track personal belongings like keys, cards, cars or even kids from my phone or computer. Such an online/ofline combination would be my killer app for now (Fedex can do it, why can’t I?)In general, if you restrain yourself to web applications, the most interesting field is that which semi-automatic brings more offline entities online to be managed and organized for consumer or business.Not so much augmented reality as in visuals but enriched reality in a broader sense..

  74. Berislav Lopac

    “We will only invest in things we know well so that takes non-web sectors off the table.”I think that with this sentence you go directly against your “contrarian” principle. Well, unless by “non-web” you mean “non-internet” which is something completely different. People have lately been confusing Web and Internet, but they’re far from being the same.I believe — actually, I know — that there is more Internet innovation coming our way, and there is a lot of stuff to be done in this area which include very little or no Web.

  75. Michael Kogan

    since you are taking off the table sectors other than web and you do not want to sit on the sidelines, contrarian then probably means investing in startups that other VCs or angels have overlooked, according to your analysis, erroneouslyhaving said that, if you don’t see any good opportunities, then you should sit on the sidelines rather than chase poor investments 🙂

  76. Alex Moore

    Your post really resonates with me, because I have been able to work full time on Baydin for the last year because I also did what you did in 2008, except I invested practically every cent I’d earned in 3 years as an electrical engineer in Amazon, Google, and Cisco instead of Amazon, Google, and Apple. Contrarian was definitely the right approach in 2008.But I don’t think right now is the time to be contrarian with respect to web investing. What we’re seeing may look like a bubble, but it’s also at least in part the democratization of software startups. YC, the other incubator programs (full disclosure, Baydin participated in TechStars), lower capital requirements, and relatively easy access to seed capital are letting regular people start companies full time, even though they don’t have enough savings to last a year, an MBA from a program with connections to the VC industry, or a Bank of Rich Family Member who can invest $100k+.That means that entrepreneurs will skew younger, poorer, and more technically capable. I don’t see how that demographic shift necessarily precludes a lower success rate for the companies that these founders start. Especially given that seed investments often happen after a startup is already showing some kind of market uptake, it seems likely that the shift could result in a higher percentage of successful startups.

  77. howardlindzon

    early web investing is very crowded right now. social leverage (web) made this happen. everybody is tuned into the one channel.that said as I know from investing in momentum, the trend can rarely be timed.good timing on this post as i have been thinking about this so much.kudos.

  78. Morgan Warstler

    Here’s the contrarian play it meets all your requirements according to your own political philosophies:GOV2.0 AppsI think a new kind of “seed fund” company needs to exist that entirely focuses on funding apps that automate state and local government services to keep $1 for every $5 saved.As long as you do not view the government as a gatekeeper (and your pretty pro-government for a tech guy) then there is a giant market for low priced subscription applications that allow local and state governments to become more productive.From fishing licenses, to parking, to parking tickets, to potholes, to bus tracking, to customer service, DMV, this list goes on and on…The customers are built in, they are being told to do more with less, if the savings are provable – its not if, its when, the market is HUGE, apps that improve citizen’s experience will be demanded, its all there.The reason I say it has to be a “seed fund” kind of play – is that one over-arching company has to be responsible for group marketing / platforming all the stuff… one parent carry all its children into the state and local governments, so that when one gets planted it becomes easier for all the others to get in there too.You shouldn’t cede the GOV2.0 market to the big tired players currently chasing it.

    1. Dan Sweet

      interesting, but the gatekeeper on this one is even worse than the IT dept. like the ideas though, makes sense.

      1. Morgan Warstler

        I’m actually using this a challenge to Fred – if he advocates government, then he certainly must be willing to fund a contrarian GOV2.0 start-up play.If he can’t imagine it, he probably shouldn’t be advocating government or Obama.I myself, believe 100% in GOV2.0 – but only if it is birthed in our world and not in the world of MSFT, GOOG, ORCL.Lobbying for Net Neutrality or Lower Capital Gains isn’t “patriotic” – taking your personal expertise – early stage investing – and DEMANDING you are allowed to solve our society / government’s problems – that’s balls out.Chicken / Pig – one contributes, the other commits…Fred deep down is a pig. He’s got this one.

  79. David D. Zito

    In my opinion good web investments right now (aren’t all really good VC investments by definition contrarian) would be:1) anything to do with private, personal development (non-social).2) bill pay and personal finance3) risk management4) ad networks (I know ha!)5) virtual pets 6) educational games/software (like Knowledge Adventure 2.0)7) App platform for construction/architects/designers/DIYers integrated into tools8) food printing

  80. Aaron J. Ruckman

    This post reminds me of your 8/4/10 post Retooling Stale Businesses…. Retooling stale businesses is also a contrarian play – the world is going hipster, you go old old school.Also, everyone is over communicating today. I’d like to see a business that makes use of fewer, more meaningful communications. I have an idea to that end sitting on the shelf right now.

  81. Toshi O.

    I think it’s easy to say/write/think contrarian and even easier in hindsite that one was contrarian, but very difficult to script and move forward.Great post – the comments are going crazy!

  82. Druce

    will take a stab…a lot of your work is around1) human knowledge is becoming more interactive, collaborative, social and 2) mobile/cloud supersedes PC, client/server.some other areas1) objects becoming internet-connected, sometimes mobile, location-aware – what else needs to be connected and tracked like Google is tracking planes? what’s a valuable set of data you can accumulate (hopefully without being evil)2) big data – all of the above means massive amounts of data is being collected about everything and everyone, how do you extract the value, what will be the ‘big data stack’ –…3) all that data leads to increased need for security/privacythe stack gets built from bottom up – enabling technologies, platforms, applications, services, so you do have to keep moving up the stack – hopefully less risky once lower levels are proven what your investors will thank you for later, not what they want you to do today.

  83. Tereza

    I love — LOVE — seniors. We’re about to be hit with a tidal wave of then.And along with that, what I call “intergenerational issues” — helping people interact meaningfully across age silos. Society used to be structured with us all integrated but we became siloed, so various generations now interact very little with each other, which creates its own problems.I did a bit of analysis on this for some volunteer work here in Westchester. It turns out we have one of the highest concentrations of seniors in the country and the work I was involved in wound up influencing some early policy and we are leading the nation in the issue. While my focus was not-for-profit, I really there is business opportunity in there.But does anything sound un-sexier to the tech crowd?The imbalance of population across generations will hit us like a tidal wave very soon.The focus is generally around social security and how do we pay for that. But there are also huge knowledge resources embedded in mature generations and it is not being exploited.So (1) is capturing that knowledge so it’s not lost.(2) is re-defining work so that they can contribute into later years than their forbears, who died earlier and also were better savers.Until 10 years ago, the way ‘work’ is structured hadn’t changed for decades.But that’s evolved, finally, as we’ve figured out how to outsource, offshore, nearshore, and use mechanical Turks.So — since they need to make a living, speak great English, are highly educated, but need flexible hours — how about senior-sourcing and mom-sourcing?Provide training/tooling/credentialing so they can participate and then give them a marketplace to do it, do their work on whatever schedule works for them so long as it’s delivered on-time and great quality.(3) is supporting “the sandwich generation” who are going to get slammed royally and they don’t see that — caring for young kids and ailing parents simultaneously. I was/am a cutting-edge Sandwich Generationista. My parents had me late (mom 30, dad 42), which is normal now but was not then. They get old and sick while you’re bearing kids…not only can’t they help you but you have to take care of them. It is brutal.BUT it eventually will be a pain point that can’t be ignored and will create a new sets of needs, for smart entrepreneurs to attack.

    1. Douglas Crets

      @Tereza I share your support for seniors, and would like to add that whilethere is going to be a tidal wave of seniors, it will mean that oldergenerations working in the education sector will be retiring, meaning thenext wave of people who work in education as decision makers (gatekeepers)wil not be the type of people to poo poo technology, social media, communitycommunications, etc.I’m looking for that killer company that can place seniors in touch withopportunities to interact with learners as a new form of teacher.

      1. Tereza

        Hey Douglas — did I put you in touch with the people from the SMART program — students and mature adults read together?They’ve had breakthrough results.Below is a description. They’ve expanded beyond what is described below.*** SMART (Students and Mature Adults Read Together)Partners In Education and AdvocacySMART is a model intergenerational literacy program that utilizes the largely untapped resources of older adults to benefit the youth of Westchester.SMART, sponsored by the Jewish Council of Yonkers takes an asset-based approach to senior involvement in the community. Older adults tutor and mentor students who are reading below grade level. Such mentoring relationships have been proven to stimulate students’ academic interest and commitment, and to foster socially responsible behavior. Through the establishment of a nurturing relationship, and with the guidance of a positive role model, success within and outside of school is more attainable for these students.SMART creates an environment that fosters achievement and creates a pattern of success and independence throughout life. In 2006, seniors in the SMART program volunteered in two Elmsford Schools, three Mount Vernon schools and twenty-seven schools in Yonkers.

  84. Tereza

    I have a theory that ‘products are from mars and customers are from venus”.And with the recent great strides in off-the-shelf freeware the next big opening is to optimize to with surgical focus on consumer segments.To win that game, you need expertise who is deep in those segments. You cannot get away with “build it and they will come”.A lot of the segments who’ve been ignored are less interested in technology for the sake of technology. They’re interested in whatever they’re trying to achieve, and can this tool bring them a breakthrough improvement in how they do that thing.I see a lot more co-development in tandem with customers.Also access to influencers and visionaries within those various segments will be a strategic differentiator.

  85. gbattle

    I need a late pass for submitting this comment …The conundrum is that the alluring value of contrarian strategies is paired with capacity constraints – only so many people can chase after those elusive gold nuggets.That said, here are a few contrarian bets:1. The move from privately controlled platforms (closed) to decentralized protocols (open) – I know, my soapbox. There could be an intermediate step for privately-controlled-yet-browser-friendly protocols like “itms://” (iTunes music store), which are not officially sanctioned protocols, but are de facto accepted.2. Innovation on SMS rather than Twitter, FB and iPhone – average teen sends 3000 texts a month, or one every 10 minutes while awake (PEW Research). No comparison in terms of engagement and SMS is an open protocol. Carriers would be smart to update the open SMS protocol and bring it into the 21st century.3. Exploit the well documented yet poorly harnessed outsized influence of minorities on SMS (African American teen texts track much higher than 3K/month) and Twitter (African Americans are 27% of Twitter community and 13% of US population).4. A platform to federate the developers and users of other platforms – think Groupon labor unions, Facebook political parties, Twitter special interest groups. A meta-platform as a check & balance for the mega-platforms. And it will be based in DC, not NYC or SF.5. A revolt against persistent identity and anything that resembles it – embrace anonymity, obfuscation, data scarcity, etc. 6. A revolt against leased living, where everything virtual is in the cloud as a service – herald ownership as the true sign of capitalism. Separate those who own from those who merely have access to. “If you like it then you shoulda put cah-ching on it.”7. A revolt against egalitarian access to web-services – VIP platforms, web services and social networks create value through earned and purchased segregation.8. A revolt against open discovery via any method that removes the highest value link inventory from Google – anti-SEM/SEO, the systematic destruction of discovery through search engines to drive direct injection of content into vertical search platforms. Calculated scarcity >> thoughtless ubiquity.Gratuitous link bait: old but relevant kookery from my end of year predictions 2009:

  86. Mrigank Tripathi

    Given that your stated areas of interest are tech, here are some ideas:1/ Contrarian would be to invest in startups that solve problems over Voice – not the web (4.8 Bn people use Voice. 1.8 Bn use the web)2/ Contrarian to me would be to create that one entity that focuses not on ‘enhancing the $ per user on the web’ (currently ~$50 per person using the web) but really on ‘stemming / growing the ARPU per subscriber of any telecom operator in the world’ (Average Global Voice ARPU has slid from $22 to $17 in 4 years).3/ Contrarian would be NOT another app that fragments an already fragmented market, but rather a single ‘Data’ window (maybe itself in the form of an APP) that consolidates usage4/ Contrarian would be to (again) allow facilitation of value creation for the end user – read ebay etc, not ‘usage that drives revenues’ – read foursquare etc.My $0.02!PS: Great thoughts all around!

  87. Lukasz

    Might be contrarian from your perspective: Invest in transaction oriented stuff. a lot of what happens in the web is not very exciting in terms of hype, but very solid businesses.Other than that: raise a growth fund… they seem to go under right now, so there will be less competition in the future 😉

  88. wood dash kits

    I think we are in the early days of training new staff. There can be as elegant as intensive services workforce genericized FB or Twitter, but there are a large part of our life where technology can help significantly, which is not addressed.

  89. Laurent Boncenne

    If anyone has to invest in education, they better invest now, it’s contrarian now, but won’t be for very long given all the talks about it.Here’s what I’d bet on :_ Education : Ideally, it should be started either in India, South America or Africa. (just because it’s a much bigger problem there than it is in developed countries. Granted, the US educational system seems screwed just as much as many other, but you would get the “I’m first” in the “market” of education and have a much bigger chance to disrupt the entire thing)Also, I think there’s much to be done with self taught education and recognition of it. (MBA mondays style)_ HCI/NCI : for the same reasons mentioned by others._ Energy generation : many people in the energy tech (solar etc..) try to revolutionize the way we store energy. I personally think we should not store it, but instead find a way to generate energy with as little as possible. Think of a motor engine which would use solar panels to simply start and when running, creating energy on its own._ DataViz : long term, I’d like to see companies having a dedicated person/team doing VIZ, I see it as corporate content curation.I should have more, but fail to remember them… will try to update.

    1. Pawan Deshpande

      Hi Laurent,What do you mean by “corporate content curation”? Our product is content curation platform for B2B marketers. Is this similar to what you are thinking of?-Pawan

      1. Laurent Boncenne

        No, I meant Data Visualization. a graphical interface or your company’s Information Architecture. good examples would be Pivot from Microsoft or this video :

  90. Bill Ferretti

    Fred, it appears to me that two important trends are evident in tech: 1. Extraordinarily low valuations (by most measures, including P/S, PE, PEG ratio, and cash/share) of Apple and many other tech giants. 2. The consolidation taking place in tech has led tech giants to “Law of Big Numbers” acquisitions. So there must be some screaming bargains among capital-starved yet promising early stage companies in that space. So maybe it’s time to think like a hedge fund operator instead of a VC???

  91. Alberto Brizio

    Fred, this one shouldn’t be too hard: just focus on applications or services that are non-social, do not have built-in game mechanics, are not location-aware, offer terrible UI/UX are not “real-time web”-enabled. I would suggest this set of 5.25″ disks for MS-DOS 2.0 I have in storage as a good starting point. Want in?

  92. calabs

    Fred Destin makes a bunch of good points, and I would take his “personal empowerment” theme further. The how of empowerment is important. The fact is that online can aggregate our interests as quickly as needed to affect change. Consumers will be able to band together against companies that maintain powerful positions with complexity asymmetry (this is the principle that a company selling a complex product like insurance or a loan understands it far better than any single customer).His “save me” meme is excellent. By addressing empowerment, consumers will be able to save themselves from the tyranny of…whatever is bugging them. It’s an exciting time.

    1. Douglas Crets

      I don’t see how this complexity asymmetry shouldn’t be able to work as ameme for building more effective web-based approaches to public education.Does anyone following this thread have experience in tinkering with thesebusiness models? I would like to pick your brain.I think about the following a lot:1. Delivering transparent reporting to parents and communities about schoolperformance, student achievements2. School as a media hub for hyperlocal reporting on community trends3. Devices that run apps that accelerate learning in asynchronous timeCourse, lots of political bureaucracy to move through, but whose to stop abright engineer or apps maker?

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  94. Jules Maltz

    Andy Rachleff (ex-Benchmark) has a great 2×2 framework. On the vertical axis, you can be “right” or “wrong”. On the horizontal axis, you can be “consensus” or “non-consensus”If you’re wrong, you don’t make money no matter what (obviously)If you’re right (but consensus), you make money – but only a littleTo make a huge return, you need to be right AND non-consensus (i.e. contrarian).It illustrates the same point, but in a “consulting-esque” visual way.It is worrisome if everyone congratulates you on a great investment as soon as it’s made (which usually means it’s a consensus bet). Better to have some people think you’re a little crazy

  95. cheap_wedding_dresses

    These are really nice. Good job. Thanks for it.

  96. Billferretti

    Fred, respectfully I’m concerned by your statement:”We will only invest in things we know well so that takes non-web sectors off the table. Add to that our particular investment thesis around investing in large networks of engaged users and avoiding gatekeepers and you have a quandary.”Please ignore the conventional wisdom to stick to your knitting. I’ve enjoyed modest success as an entrepreneur and angel investor by NOT sticking to my knotting. MSFT is in trouble because it stuck to its knitting far too long. Jeff Bezos has enjoyed great success by investing not only in the Kindle, but by seeing the potential to become a major player in both online retail and cloud computing. McDonalds ignored the obvious success of Starbucks for too many years before seeing how serving exotic coffee could strengthen its slow afternoon business. What if Steve Jobs stuck with laptops and software instead of putting record stores out of business and asking people what they didn’t like about their cellphones?Consider the market as your master and don’t underestimate your ability to grasp new opportunities built upon your most important skills: finding market opportunities and entrepreneurs who know how to exploit them. Your knowledge about the web can be exploited in many other unpredictable ways. You’ve probably read Jobs’ Reed College commencement address where he talked about the most life-altering course he took in his one year at Reed, calligraphy. Knowledge informs unexpected opportunities. Please broaden your mission and vision. You’ll make money and have more fun.


    Bill, I absolutely agree with your comment. You are such a wise guy! I would like to attend your private VC school.

  98. jon

    Great thread! Jumping in late here, but …One interesting approach is to use non-standard market segmentation to identify underserved areas. For example you can look at the business software market in terms of Paul Graham’s maker/manager distinction and Ronna Lichtenberg’s blue/pink communication styles discussion. When I did that a couple of things jumped out: “pink managers” are underserved; and admins are missing from Paul’s worldview. Of course this just points to potential areas, you then need to look at peoples needs to see what’s not being met, and do the usual market sizing etc. to see if it’s real.Also I think Tereza’s XX Combinator idea is a great approach for generating well-thought out contrarian investment opportunities. So another strategy for being contrarian is to put the time into thinking how that [or something with similar goals] could work and follow it up with investment.jon

  99. Sebastian Wain

    This is a partial sharing of my list, I don’t see all of them as contrarian but I am not seeing good investment in those areas:- Search engine for page structures (mainly html+css+javascript+render) instead of page content. This is good when you’re searching for design.- General search engines: We need a way to play with the web graph at its real scale, call it: Google Search API (currently closed) + A way to process information (i.e: map/reduce or similar techniques). Yahoo did it better than Google with BOSS but fall short. What solution does it solve? I did marketing research with custom crawler/mining tools and we need a way to do it in a big scale without crawling [all] the web ourselves. – More Google Predicts copycats.- Focused Crawlers.- More Web “2.0” Wikis and including some environment to quickly script web stuff over it (in the same web environment). I imagine using it for quick mashups.- More Web Chart/Graph Visualization tools, the web doesn’t have a [strong] interactive graph visualization based on canvas or svg. I am talking of something like prefuse, jung, tomsawyer.- Including ads over torrents in realtime, you download a torrent but ads are added based on your location/profile/etc. The most transparent the better.Enough sharing!

  100. Andrew G.

    Fred, I wrote a few days ago a few general big picture thoughts about your post, and I have since been thinking about a more specific idea I can contribute. As a caveat, my idea does rest on the premise that you have made enough money to live well for the rest of your life and be certain that your offspring will be solidly upper middle class for a few generations to come. Here’s the idea, and I believe it’s about as contrarian as it gets: you and Brad and Albert make USV fund 3 not a for-profit fund, but rather a 501c3 charitable organization. The donors to your USV fund 3 501c3 could consist of 1) your usual individual investors (though the individual investments shall be in the form of tax deductible donations and no money shall ever be returned to those donors); 2) endowments and foundations which are subject to the 5% rule, and give away money every year. The purpose of USV fund 3 as a 501c3 is to invest in not-for-profits which use technology and the web to solve the problems of our country. Instead of selling the successes to MSFT, GOOG, AMZN and other cash rich companies, the successes in this new fund would grow into conventionally funded non-profits. (As an aside, there is no law that says a not for profit cannot be sold, so there is a potential for profit in the pure money sense; such profit would have to be disbursed as donations under 501c3 regulations.) USV funds 1 and 2 successes prove that small amounts of invested capital can have huge impacts on people’s lives and this same basic concept is the guiding light behind my idea. Your field of opportunities would broaden considerably, and the impact on society would be immeasurable. And you would never again have to post a blog about what to do with your cash! Just an idea which I believe is contrarian, hope you like it. (Brad knows, or can guess, who I am if you’d like to follow up on this.)

    1. fredwilson

      i like to invest in “zero profit” businesses, like donorschoose, which aresustainable businesses but are not built to generate cash flow for theirinvestorsi am not sure we’d do this through the USV business, but it is a good ideathat i also have been thinking a fair bit about

      1. Brett Shere

        A different route is making seed and early stage equity investments in social enterprises that will generate both financial and social value. Assuming your interest in the “zero profit” businesses is about generating social value, there are opportunities to invest in ventures with both transformative social potential and profit potential. I’d imagine your own angel investing is probably a better point of engagement than through USV though.Here’s a blog post of mine summarizing how I think about this in the African context: Basically, a continent of 900 million people is almost completely unserved by angel capital markets. Filling that gap is an opportunity to do enormous good as well as reap significant financial returns. If any of that is of interest Zenzele(which I co-founded) drives co-investment on African deals with high social and financial potential, between western and new African angels. Would be happy to shoot a couple decks your way if that seems interesting.Its great to hear your comment that impact investment is something youre thinking about seriously–there is tremendous value you can add to the space.

  101. Rob Rawson

    With Internet investments I don’t think it’s about contrarian or not contrarian. It’s about the valuation and the risk.A lot of start up internet companies with no revenues are valued at $700k or higher. This is ridiculous. I think a valuation of $300k is ridiculous (unless it’s balanced by other factors such as the founders working for 2 years with no salary for example).

  102. Mark Essel

    Deciding when the mine has run dry is up to each investor. Agree that consumer app market is heavily invested in, but the world’s not done getting people online yet Paul, there’s 4 billion more to go :DInteresting notion about liquidity and VC investing. Any ideas how that would work. Most bets are long ones.

  103. fredwilson

    that’s not kookery, that’s spot oni consider myself a fund manager, not an entrepreneurbut i see myself in the story you are tellingand it bugs mei don’t want to start making investments in a sector i don’t understand either

  104. baba12

    The 4 Billion you talk have more pressing needs than being online. None of the web services will cater to their needs really. For most of the world still has fundamental issues to resolve and web services cannot do them. Provide clean drinking water, electricity and basic education, things that you have and take for granted to deliver web services on top of. those 4 Billion plus folks don’t have and won’t have for the foreseeable future.

  105. Mark Essel

    I could make the case that basic education and net access go hand in hand. Can’t argue with the other basic needs being met first.I think you overestimate the cost of net access, versus how much it can change a community.

  106. panterosa,

    One of my choices would be to invest in the convergent space of water/utilities in underserved areas, with a green spin to delivery thereof, and disaster relief/ngo type work. As a designer, I think we are finally at a point to make simple solutions and products make a difference here, in elegant, sustainable ways. It would be nice to see some mobile/online connection to a solar tent charging the device, next to a small scale wind device also acting as cell tower. And to have the whole things collapsible and easily movable.

  107. Tereza

    The main access point becomes mobile in the Third World.Our “third screen” is their first screen.I think BRIC and the developing world will leapfrog us in mobile.Especially if our carriers can’t get out of their own way.

  108. Antony Evans

    Fundementaly the 4 billion need income which they could spend to solve most of these issues… I think there are a lot of ways the web can provide them with that.

  109. Dave Pinsen

    There’s an pseudonymous blogger who is a water engineer by profession, as well as being an active stock investor on the side. Given all the talk about how water was ‘the next oil’, I asked him once whether there were any good investments in water. His short answer was “no”. His longer answer was, essentially, that developed countries already have water infrastructure, and countries that don’t have it can’t afford it. As for a green spin on utilities, green often equals more expensive (and in the case of wind and solar, intermittent), so in those cases I’m not sure how attractive they would be for poor areas. More broadly, sometimes the best solutions for third and fourth world areas don’t come from first world thinking. One example that comes to mind is WaterAid, an NGO the Financial Times did a charity appeal with and which I blogged about last year. WaterAid works in Bangladesh, where had been common for villagers to defecate on the ground or in the same river from which they got their drinking water. Rather than try to introduce western-style sanitation, WaterAid got locals to evangelize the use of composting toilets. These had the dual benefits of keeping the villagers from polluting their drinking water and giving them a source of fertilizer that increased crop yields.

  110. baba12

    true communications plays a big role in helping change the community. But to provide net access and power devices you need cheap sources of energy and for now for most of the 4Billion people without net access or drinking water. The choices a government has to make what to invest in means drinking water and energy take up primary pole positions in the race, everything else comes in second/third/n///Web services could provide a way to track corruption and bring transparency to how governments/elected officials etc are obfuscating their responsibilities.

  111. fredwilson

    i don’t even know how one would “short facebook”you’d have to borrow shares from a shareholder and then sell themnot easy to do in a private company

  112. Dave Pinsen

    Fred,I just clicked on “in reply to PRoales” and I ran into a Disqus issue I’ve seen before with longer comments: his comment comes up, but I can’t see the top or bottom of it, I can’t scroll, and I can’t see the “jump to this comment” link which is probably outside of my field of view.

  113. fredwilson

    i will report that to disqus. thanks for flagging it.

  114. RichardF

    go long Diaspora

  115. riemannzeta

    It’s the assets that are hardest to short that are most prone to overpricing.

  116. Harry DeMott

    It is the beauty of the education market. In my town they command 80% of the budget – so there is always $ there – the question is how to get at those $, since they are perpetually clamoring for more.

  117. Aaron Klein

    Charlie, I see much the same thing from my vantage point on a school board. Would love to compare notes and discuss directly with you at some point – drop me a note at ak AT if you’re interested.

  118. ShanaC

    we wouldn’t have gotten tires otherwise.

  119. fredwilson

    my partner Brad thinks like you do

  120. willwhutson

    totally agree

  121. willwhutson

    gotcha, or “strategically short” on facebook