The Innovator's Solution: Creating and Sustaining Successful Growth (Creating and Sustainability Successful Growth)

by Clayton

on occasion venture capital investors en masse conclude that a “category” is going to be “big”—even while there is no consensus which firms within that category are going to succeed. This results in a massive inflow of capital into the nascent industry, which funds more start-ups than can possibly survive, at illogical valuations. He notes that when investors and entrepreneurs are caught up in such a whirlwind, they almost have no alternative but to race to out-invest the competition. When the bubble pops, most of these investors and entrepreneurs will lose—and in fact in the aggregate, the venture capital industry loses money in these whirlwinds. The only way not to lose everything is to out-invest and out-execute the others.