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Ben Black of Akkadian Ventures learned an expensive lesson by building a reputation for securing deals at a discount. This focus on price caused him to pass on exceptional companies he had access to simply because they weren't cheap enough. He now emphasizes that the quality of the asset is far more important than the discount you can negotiate.
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Citing a quote from legendary investor Jim Breyer, Miles Clements emphasizes that while the science of VC is valuation, the art is knowing when to ignore it. He shares that Accel missed investing in ServiceTitan, a $9B company, by rigidly adhering to valuation multiples for vertical SaaS, learning a costly lesson about the need for flexibility with generational founders.
Lara Banks of Mechanic Capital warns against the 'value trap' of investing in a cheaper, lower-quality company. Experience shows it's better to pay a premium for a top-tier company with a strong management team, as the perceived discount on a lesser competitor rarely compensates for its inherent weaknesses.
Blue Moon passed on Perplexity's $90M round due to strict price discipline and lack of time for deep diligence. This highlights how rigid adherence to valuation can lead to missing out on category-defining companies, especially in rapidly evolving markets like early AI where standard metrics may not apply.
The pursuit of a "diamond in the rough" is an investor ego trap. Andreessen argues that great companies are obvious "diamonds" that attract widespread interest. A deal that seems undiscovered is often "in the rough" for a good reason, like a flawed structure or a hyper-disagreeable founder who has alienated other firms.
The best investment deals are not deeply discounted, low-quality items like "unsellable teal crocodile loafers." Instead, they are the rare, high-quality assets that seldom come on sale. For investors, the key is to have the conviction and preparedness to act decisively when these infrequent opportunities appear.
Andreessen reflects that, specifically in early-stage venture, his firm's decisions to pass on promising companies because the valuation was too high have consistently proven to be mistakes. For the best opportunities, the potential for massive upside makes the entry price a secondary concern.
Marks' early career experience losing 95% on 'great' Nifty Fifty stocks taught him a core lesson: no asset is so good it can't be overpriced, and few are so bad they can't be a good investment if cheap enough. This principle of 'buying things well' became his foundation.
For promising venture-stage companies, price sensitivity is a losing strategy. The truly exceptional opportunities attract significant interest, driving up valuations. According to Andreessen, the mistake of omission (passing on a future giant) far outweighs the mistake of overpaying slightly for a winner.
The most profitable opportunities are not constantly cheap assets everyone sees, but high-quality, scarce assets that go on sale infrequently. This requires investors to have conviction and act decisively when these rare moments appear, distinguishing it from simple bargain hunting.
Legendary VCs like Fred Wilson advise to 'never pass on price.' A more nuanced take is to use a high valuation as a tool to gauge your own conviction. If doubling the price makes you hesitate, it reveals a lack of belief in the founder or market, which is the real reason to pass, not the price itself.
