When Thrasio, the firm that bought his company for $25M, went bankrupt, the founder used his supplier relationship as leverage to negotiate a buyback for just $2M—less than one-tenth of the sale price.

True investment courage isn't just writing the first check; it's being willing to invest again in a category after a previous investment failed. Many investors become biased and write off entire sectors after a single bad experience, but enduring VCs understand that timing and team make all the difference.

For a high-quality cyclical operator like NVR, the key to success isn't perfectly timing the market bottom. It's having a "patience advantage"—the willingness to buy when sentiment is low and hold through uncertainty, confident that demand will inevitably recover.

Bob Robotti doesn't see being early in a cyclical investment as a failure. Instead, it provides the opportunity to buy more at even cheaper prices as the downturn deepens. The initial investment is a placeholder for a better opportunity to come as maximum pessimism is reached.

With fewer traditional credit cycles, the most fertile ground for distressed investing lies in industry-specific downturns caused by technological or policy shifts. These "microcycles" offer opportunities to invest in good companies working through temporary, concentrated disruption.

Rather than abandoning an investment category after a failure, some VCs intentionally fund the same idea again in a new company. This strategy is not about repeating mistakes, but a high-conviction bet that the core idea was simply ahead of its time and that a change in timing or underlying technology will enable its success.

When investing in a post-bankruptcy company, Robotti's firm was welcomed by the CEO. The existing owners (banks) were short-term and wanted out, creating instability. A long-term shareholder's perspective aligns with management's desire for job security and the ability to execute a multi-year strategy.

Extending the Rudiger Dornbusch quote, Bob Robotti argues that the longer a downturn in a cyclical industry lasts, the more capacity is forced out of the market. This reduction in supply creates the conditions for a much larger and more profitable recovery when demand eventually returns.

During diligence, an acquirer discovered their target was on the brink of bankruptcy. Instead of walking away, they negotiated with the target's bank to purchase all its debt. This made them the secured creditor, allowing them to take ownership of the company through a controlled Chapter 11 bankruptcy process.